Challenges associated with disposing of existing fuel stock and congestion of depots across the country, may have forced the Nigerian National Petroleum Corporation, NNPC, to suspend further importation of premium motor spirit, PMS, or petrol.
The glut in the market has forced the Pipelines and Products Marketing Company, PPMC, the marketing arm of the NNPC to adopt a number of measures including:
Suspending further importation to reduce stock levels
Reducing ex-depot price (unofficially) by N2/Litre, quoted as N87.66/L as at September 10, on the Petroleum Products Pricing Regulatory Agency, PPPRA official website.
Depot decongestion, and,
Checking demurrage and depot throughput costs
However, all of these measures have not helped the corporation in reducing the stock level by encouraging marketers to lift more products.
Indeed, some retail outlets have also supported the move by reducing pump price of petrol from N97/L to N96/L to encourage patronage.
Although there was no official comment from the NNPC, but a top management source confirmed with Vanguard on the telephone yesterday night that: "In the light of all these factors mentioned above, it will be purely a commercial and economic sense to take such measures."
Besides, our source noted, "It is to the credit of the NNPC that in the last three years there has been no scarcity of petrol in the market," adding that "The stock levels we currently have are more than sufficient to support the period of the suspension until we are able to decongest the depots, and the vessels at sea waiting to berth are able to discharge their products."
Furthermore, a source from the Department of Petroleum Resources, DPR, who spoke to Vanguard in confidence on the telephone, also confirmed that "There are a number of vessels waiting to discharge. But I cannot confirm how many until I check the records tomorrow (today).'
He added, "For us (DPR) our concern is to monitor the stock levels, who is bringing what from where, and if there are issues, we can then raise concerns."
Suspension of imports
A Reuters reports quoting market sources said the Pipelines and Product Marketing Company (PPMC) has suspended the importation of gasoline (petrol) into the country.
According to the sources, gasoline was suspended after over-buying in the wake of a fuel subsidy scandal last year.
They said the pipelines and product marketing Co (PPMC) has cancelled cargoes, as it tries to work through a 10.2 million barrels (1.2 million tonnes) surplus of the motor fuel waiting off-shore.
Nigeria has about 1.2 million tonnes off-shore waiting to discharge as all previous agreed lay cans (deliveries) has been cancelled, said one regional source.
However, the PPMC spokesman, Nasir Imodagbe, in a telephone conversation said, he was not aware of any cancellation of orders, but that a decision to suspend imports would be that of the regulator, the Petroleum Product pricing regulatory agency (PPPRA).
He said "Whatever volume the PPPRA allocate to us, we ensure to deliver it. If there's going to be any suspension, it should come from the PPPRA"
The PPPRA spokesman denied there had been any suspension, but he added by saying "We are regulatory body, we don't import ourselves'.
According to an official working for a major Nigerian fuel marketer who said that the glut is a direct consequence of the crack down on fuel subsidy fraud. "A lot of marketers are not being paid subsidy, so the government had to order the fuel itself. To do that, they had to sub-contract to a lot of people to bring the fuel in. they ordered too much".
"When NNPC proposed to switch to a system of swapping crude for gasoline, everyone thought it was a brilliant idea as you deliver gasoline, get your crude and don't face payment problems,"an executive at a trading company said.
"But then somehow, allocations went to too many people, who kept delivering gasoline even before getting crude. So as a result the issue of oversupply arose."
Vessels waiting to berth
According to Reuters, ship tracking data showed around 45 oil products cargoes off the coast of the port of Lagos, where the fuel comes in, waiting to discharge.
As the import halt hit oil refineries in Europe, which supply most of the fuel to Africa's most populous nation, at least, 3.8 million barrels (450,000 tonnes) of gasoline is expected to attract new buyers in the coming month.
Though Nigeria normally import around 7.6 million barrels (900,000 tonnes) of gasoline each month with PPMC responsible for roughly half of the buying, the PPPRA, which allocates the other 50 per cent of gasoline import to private traders, has not yet announced it's final requirements for the fourth quarter.
The companies allocated imports by PPPRA are not expected to book any gasoline purchase before December said by a market source.
Gasoline gluts have occurred in the past off Nigeria, but the scale is far worse than usual and a suspension of import deals is very rare.
However, glut had been created by the Nigerian government last year in the wake of fuel subsidy fraud.
The finance Ministry and the Parliament last year, probed Nigeria's fuel subsidy programme, which provides gasoline and diesel to the population at prices well below international levels.
The probes however, exposed a web of corruption and fraud by government officials and fuel marketers that had cost the state billions of dollars, with much subsidized fuel never being ordered or being diverted to Nigeria's neighbors and it led to the expansion of the crude for gasoline swaps program, in a bid to remove cash payment from the system.