12 June 2018

Nigeria: Akinfemiwa - Govt Must Deregulate Downstream Sector to Stimulate Investment

The Chairman of the Major Oil Marketers Association of Nigeria (MOMAN), Mr. Akinsola Akinfemiwa, spoke with select journalists on issues militating against having a thriving and competitive downstream sector as well as solutions to address challenges in the industry. Excerpts:

In 2016, you were elected as Chairman of MOMAN after having had one Chairman for a long time. What informed the baton change?

MOMAN's emergence as a strong voice in the industry was as a result of the vision of the founding Chairman, Mr. Wale Tinubu, whose tenure as Chairman saw the essence of setting standards and promoting best practices within the industry. As the Leader of a growing diversified energy company along the value chain, of which marketing is a part, he could not devote the time required at a very tumultuous period for the sector and he relinquished the position and my colleagues in MOMAN elected me to take up the mantle of leading the industry at a time when importation was getting more difficult due to unavailability of foreign exchange. Also, outstanding subsidy payments was bringing the industry to its knees and many other challenges required collective efforts to overcome.

What are the plans to reposition the downstream petroleum sector in the light of recent happenings?

Most of us have been in the industry for a long time and we are critically aware of the cyclicality of the events of the last few years. Remember that we have a huge stake in the country's economy with our investments in retail outlets, storage facilities, people and systems and this shows we are here for the long haul.

Recall that the last fuel scarcity and distribution challenges were resolved largely with MOMAN resources. We ensured product availability and pricing integrity across the nation because our pedigree means a lot to us and we see ourselves as partners in progress.

That said, we are business concerns and we require an enabling environment to thrive. MOMAN is certain that we are stronger together and would actively seek areas of comparative advantage and collaboration along the downstream value chain as we currently do with the ATK Tender and joint imports to the benefit of our customers.

With the current supply cost hurting the amount accruable to the federation account and making deregulation inevitable, we believe our investments put us in good stead to reap bountifully in the coming years.

What is MOMAN currently doing to recover oil subsidy debts the government is owing its member companies?

I would like to answer this question as a downstream operator because the federal government doesn't see the dichotomy. We have gone through several rounds of verification exercises to ascertain the outstanding subsidies; late payment interest and foreign exchange differentials and several promises had been made to clear the outstanding amount, but we have not received any payment. We have not relented in our efforts to get the payments with submissions and engagements with the Presidency, National Assembly and other agencies of government. With the hard work already done, it is a matter of when, not if we would be paid.

How has MOMAN member companies been able to manage their working capital given the non-payment of this debt?

It has been very tough. The working capital deficits has taken a more drastic turn with the banks taking a pessimistic view on lending to the sector. Our reputation as worthy partners precede us in the marketplace with suppliers willing to support us especially with better terms for deregulated products. However, internally we keep finding ways to survive these hard times by reducing our cash cycles, curbing costs, improving efficiencies, inculcating good customer service, ensuring the integrity of our pumps and smart procurement of our inventory.

How sustainable is the current supply chain and distribution model of the downstream petroleum sector given the huge landing cost of petrol which is said to be higher than the open-market pump price?

It is clearly not sustainable. The best way is to deregulate the sector to stimulate the necessary investment in inland storages, pipelines and reduce the wear and tear on the roads and other infrastructure by heavy laden trucks which we use to distribute petroleum products.

MOMAN recently appointed a new Executive Secretary. What are the association's strategic objectives following this administrative change?

I must first acknowledge the great advocacy and proactive policy interventions done by the outgone Executive Secretary (ES), Mr. Thomas Olawore. His experience and maturity was invaluable to all MOMAN members and he had a deep network that was ultimately beneficial to MOMAN. On behalf of all MOMAN members, I wish him a peaceful and healthy retirement. The appointment of Mr. Clement Isong as Chief Operating Officer about six month ago was designed to ensure a seamless handover upon Olawore's retirement.

I would also like to use this medium to welcome him onboard. With respect to long term strategy, the industry is expected to evolve and as the largest single set of stakeholders by market share and investment, we carry the biggest risk if we do not adapt.

The new ES is expected to drive the vision of the association in the transition to a deregulated market especially with the new regulations that would guide the process. We also expect a lot of self-regulation within the sector that would lead to the need for an expanded secretariat to deal with the various teething issues that would arise in the transition.

Our dealings with the public and governments at all levels, which is already being done, is expected to be through pooling of resources as we did to resolve issues around tanker movements within Apapa.

Overall, we expect the secretariat to become a reference point in all matters relating to the downstream sector by harnessing the limitless talent in the member companies for the benefit of our customers and economy.

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