Marketers decry neglect of downstream sector

Major Oil Marketers Association of Nigeria (MOMAN) has decried the neglect of the downstream sector in Nigeria and called for a policy direction for the sector.
Its new Chairman, Mr Adetunji Oyebanji, said at a media interaction in Lagos that there was need for regulating policy on the future of the downstream sector.
Oyebanji who took over from Mr Andrew Gbodume of MRS, also doubles as the Managing Director of 11Plc (formerly Mobil Oil Nigeria Plc).
He said that there must be a policy direction that would put the industry on a sound footing for the future.
Members of MOMAN include Conoil Plc, 11 Plc, Forte Oil Plc, MRS Oil Nigeria Plc, OVH Energy Marketing Ltd., an Oando licensee, and Total Nigeria Plc.
Oyebanji said that the industry’s framework should be reviewed.
He said that the legislation like Petroleum Industry Bill (PIB) should be passed by the National Assembly and sign into law by President Muhammadu Buhari.
The chairman said that MOMAN members were really suffering from lack of policy direction for the sector.
“Once there is no scarcity, people don’t care about what is going on along the distribution value chain.
“Jobs are being lost, other companies that provide logistics for the sector are dying. In the long run, it will have a negative impact on the economy as a whole.
“The entire value chain needs to be catered for through government policy.
“Most international oil companies have divested from the downstream sector, others have closed their terminals and this is not good for the industry,’’ Oyebanji said.
The chairman explained that the downstream sector was not attractive due to the fact that the sector was regulated as against deregulation.
“The Nigerian National Petroleum Corporation (NNPC) is the sole importer of Premium Motor Spirit (PMS), otherwise called petrol, and the non-payment of fuel subsidy debts.
“We are tied to a margin that we cannot adjust. Poor profit margin, low investment in infrastructure like pipelines, tank farms, depots and trucks are factors hindering growth in the sector,’’ he said.
When asked to explain about the partial payment of subsidy debts by the Federal Government recently, he explained: “a promissory note was raised to cover part of the legacy debts.
“We have issues with the banks on how to liquidate the notes.
“We are still expecting the payment of the outstanding in near future. Reconciliation between marketers and PPPRA is still ongoing.
“In fact, the Central Bank of Nigeria (CBN) has directed commercial banks to fix interest charges on the debts effective from July 1, 2017.’’
Oyebanji added that resumption of petroleum products importation was not being contemplated at the moment, saying that the regulatory environment was not profit-driven.
The MOMAN chairman explained that price adjustment was a function of several factors of which crude pricing was just one of the various indices.
He said that the exchange rate was a major determining factor, and that except the present price template was reviewed taking into account all the changing market variables, pump price might likely not change in either direction.
Oyebanji noted that since the association was operating under a regulated regime, it could only follow the guidelines issued by the industry regulator.
He said that available infrastructure might not support the idea, because beside high exchange rate, other associated costs like bridging, which was done by road takes toll on transportation of products.
The chairman said that marketers were currently operating at a huge loss, adding that many operators had shut down operations because the sector was highly regulated and not investment friendly.
“We are currently tied to a margin which is fixed and we cannot adjust.
“If my input cost is going up and exchange rate is going up, it affects our business, pump price has to do with exchange rate, so we have to understand the economics,” he said.
The Executive Secretary of MOMAN, Mr Clement Isong, said so far members of the association had received about N237 billion in the form of promissory note.
Isong said that the association was engaging the commercial banks on other issues, especially on how the notes could become cash.
The secretary, however, expressed the hope that a second tranche of the payment would be made soon by government.