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Why Fuel Queues May Linger

By Collins Olayinka, Abuja
19 December 2015   |   1:19 am
The payment of outstanding subsidy claims to marketers notwithstanding, marketers are currently unable to import due to scarcity of foreign currency.

Fuel-scarcityIT is increasingly becoming clear that the lingering fuel queues in major cities may persist much longer.
The payment of outstanding subsidy claims to marketers notwithstanding, marketers are currently unable to import due to scarcity of foreign currency.

Indeed, government has failed to assure marketers of availability of foreign currency to pay for imported product, while the banks are also wary of granting credit facilities to the marketers.

A marketer, who spoke to The Guardian in Abuja, said: “Nigerians must understand the issues. The importation of petrol goes well beyond government paying the outstanding subsidy claims.
“As at today, the approval for exchange rate is N187 to the dollar. But in reality, government has not provided the foreign currency needed by marketers to bring petrol.
“There is a balance of about N60 differential in the official exchange rate and the unofficial rate. Who pays the balance? This is where the issue is.”

Indeed, all eyes are on the Nigerian National Petroleum Corporation (NNPC) that has now become first line of supply, instead of the last line of supply.
The Minister of State for Petroleum, Dr. Ibe Kachikwu, lends credence to this fact when he alluded to the challenge of foreign exchange faced by marketers.
“We will be looking at how to stabilise the foreign market by making provision for some allocation to the oil industry for exchange rate. This will help stabilise the exchange rate.
“For many years, we carried on with the figure of over 50 million litres as daily consumption,” he said.

To reduce the quantum of subsidy, Kachikwu hinted that from next month, Nigerians would pay more for petrol, but such marginal increment would align with the price of crude oil in the international market and would be within N87 and N97 per litre.

While supplanting ‘subsidy’ with price modulation, Kachikwu insisted that modulation is meant to reduce the amount of money government pays on subsidy.
“This has nothing to do with subsidy removal or whatsoever. There has been so much emotion around subsidy issue. My view is that the Federal Government should not spend as much as it is spending on fuel subsidy.
“So, it is an issue of responsibility approach. This year, the Federal Government has spent about N1 trillion on subsidy payments. What I am trying to do is not to spend that kind of money.
“We all know that President Muhammadu Buhari wants to ensure that in whatever we do, poor people are not adversely affected. He has asked that we should do this in a way that palliatives would be provided for some of these  . . .
“So, what we are doing has become more intellectual and no longer yanking off numbers and whether subsidy should go or not.”

He hinted that Petroleum Products Pricing and Regulatory Agency (PPPRA) template would be reviewed, in terms of costs elements, allocation to Petroleum Equalisation Fund (PEF) and foreign exchange provisions.
Kachikwu also stated that with daily consumption at about 38 million, curbing smuggling is expected to further reduce it to around 36 million.

He added: “The figure for national daily consumption of petrol is slightly below 40 million litres. We are projecting that if we could block the smuggling of products out of the country, we may likely achieve a daily consumption of about 36 million litres per day.
“With this analysis, if we are able to get product to the market and sell close to the prices at the international, price mechanisms would have allowed selling of product between N87 and N97 per litre within price modulation.”

The minister declared that the refineries are nothing but scraps in their present state, which influences government decision to seek technical partner that would rehabilitate and run them as a profit centre.

The Guardian gathered in Abuja that areas that would be affected by the review of PPPRA template include the bridging fund (administered by the PEF), which collects N5.85Kobo; retailers (N4.60Kobo); transporters (N2.99Kobo); dealers (N1.75Kobo); and marine transport average (15Kobo).

In all, N15.49Kobo is paid as additional charges on every litre of petrol sold in the country, out of which government intends to reduce dramatically to around N11 on a litre.
Reacting to the planned reduction of bridging charges, immediate past Executive Secretary of PEF, Olufunke Kasali, said the Fund has robust system to absorb the cut.

She explained that the ‘Project Aquila’ of PEF has eliminated inefficiency in the system and reduced amount of money needed to pay for bridging.
But for now, there may be no end in sight to the fuel queues across the country.

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