The Chief Executive Officer and Executive Secretary, Major Oil Marketers Association of Nigeria, Mr Clement Isong, in this interview with ’FEMI ASU, speaks on vital issues in the downstream sector of the Nigerian oil and gas industry among others
For more than two years, private oil marketers, including your members, have stopped importing petrol, with the Nigerian National Petroleum Corporation now the sole supplier. How has this affected your members’ businesses?
It has been extremely difficult for us because Nigeria is a petrol-driven economy; I think 80 per cent to 90 per cent of what we do in the filling stations is to sell petrol; that is the core business.
And part of that business is the importation of petrol. Now that the price of petrol has stayed at N145 per litre – I read recently in the newspapers that the Petroleum Products Pricing Regulatory Agency said the pump price should be N182.
Nobody can afford to bring in petrol at N182 and sell at N145. The NNPC is the only one that is doing it through its subsidiary, the Pipelines and Product Marketing Company. It is a choice that the Nigerian government has made; this has removed a significant aspect of our business, and we all have to buy from the NNPC.
So, the business environment has been extremely challenging. I do not think there is any industry where you have had more closures than in my industry. So many filling stations have closed shop.
So many oil companies have closed down. Many of those whose business model was simply the importation of fuel – people who owned depots – have closed down. I don’t think there have been a time when business has been rougher for my industry than over the last couple of years. It has been extremely rough.
Despite this challenging environment, there are still some operators who are building new filling stations in parts of the country. What is your take on this?
First of all, let me say that most Nigerians are eternal optimists. If someone has a filling station and there are a lot of vehicles patronising it, another person may see that and decide to establish a station in that same area.
As you can see, a lot of the Lagos population has moved to the Epe axis, and so what you find is that services move to follow them, including filling stations.
For instance, if you drive along the Ajah-Ado-Badore road, you will see what has followed the population there.
On that road alone, maybe there are about 20 filling stations. When people move, the services that they need move with them. If I have three or four filling stations in a place where people are moving from, I can either lie down and die or I can look for money and build another filling station where people have moved to and hope to survive. It is still the same money circulating because to do nothing is to lie down and die.
How has the fixing of the price of petrol by the government affected the downstream sector of the oil and gas industry?
I know for a fact that it is hampering investment. We hear that a lot of modular refinery licences were issued. We are aware that the construction of the Dangote refinery is ongoing – it is being built on a free trade zone; so the products out of the refinery, if the Nigerian economy cannot absorb it, will be exported.
They can continue to build their own refinery because they are pretty sure that the products can be exported in the event that the Nigerian price cannot accommodate them.
That construction will continue; all the other refinery projects have reached some stage of almost take-off. I think one or two have made some progress but then most of the refineries will produce diesel, which is deregulated, so they can sell at a price that takes their costs into consideration.
But they will slow down and wait until the petrol price is deregulated before constructing the units that will produce petrol.
We have reached a stage where the haves and the have-nots are in competition with each other; the have-nots are many and we need to think of them. We cannot just wake up and increase fuel prices; that is not what we are advocating.
We are not advocating increasing the sufferings of Nigerians. What we are advocating is for us to have the conversation and put in place what is required to mitigate the challenges Nigerians will face.
That is what we need to do; we need to arrive at the right mitigation and allocate the resources that are necessary to achieve this. What causes prices to go up when fuel price goes up is transportation.
So if we can sort out transportation in such a way that transportation costs do not go up for majority of Nigerians, then food prices will not increase.
What are the other things Nigerians are looking for? They are looking for better quality education, health care, etc. Let us put the money that we are spending on subsidy to good use. Let us develop small and medium enterprises; let us invest in subsidising agriculture instead which will be a massive employer of millions of Nigerians; and let us subsidise all areas that relate to human capital development.
Given the recent increase in Value Added Tax and the proposed hike in electricity tariff, the chances that petrol will be deregulated this year are slim. What will this mean for your industry?
For MOMAN, we think that deregulation is what the end-game should be. As for the timeframe to get there, we need to have a discussion on that. What we need to do now is to focus on putting the mitigating factors in place, so that by the time petrol prices go up, then people should be able to afford them. We talk about transportation; we talk about the initiatives in education and healthcare. All these need to be done early during this period so that by the time the government is ready to deregulate, people are ready for it.
Having said that, we are in a situation in my industry where margins have not been looked at since 2016; now we are in 2020. We need to increase salaries of our workers. The national minimum wage has already gone up. If our margins are not increased, how do we pay the N30,000 minimum wage? How do we maintain our stations? Inflation rate has increased.
The fuel price may not go up because the Nigerian people have decided that they want it at N145; that is all well and good. However, we still need margin adjustment, otherwise businesses will continue to close down and people are losing their jobs.
We need the PPPRA to look at our margins now. It is taking too long, and our members are declaring losses. It can’t last longer than this. It has been too long. Increased margins today is not a luxury; it is a necessity, otherwise your fuel distribution system will collapse. It is collapsing already. If our margins were to be increased, it just means that the government will be funding more. Because you want to keep the distribution system working, if you don’t do something, the trucks will stop running.
Already we are beginning to see signs of a collapsing truck transport system. You see all the truck accidents; they are all the sign of an ageing and poorly maintained truck fleet. Those are signs of collapse. Transporters need to make enough money to pay their drivers and maintain their trucks. A truck should not be carrying petroleum products if it is more than 15 years old.
But in Nigeria today, we have 30-, 40-years-old trucks carrying petroleum products. What do you expect to happen? Today, modern trucks have anti-rollover, anti-spill, anti-skid, anti-theft and satellite tracking devices, among others. Nigeria is lagging behind other African countries because our fuel price is fixed.
We are behind because there is no investment in new trucks. The fuel tanker accidents in the country are too many. As MOMAN, we are engaging with the government, the Federal Road Safety Corps and the Department of Petroleum Resources; we are doing the best that we can to reduce the number of accidents using our expertise.
You were appointed as the CEO/executive secretary of MOMAN in 2018. What have you done so far to move the association forward?
When we came on board, we tried to do an analysis of what the challenges of the Nigerian petroleum downstream were. We also had to do an analysis of the kind of structure that we needed in place.
The owners of MOMAN – the directors – had decided that they needed to move to the next level because there have been a deterioration in the oil industry over the last 10 to 15 years, and they decided that something radical had to be done. And if they were going to play any part in it, the vehicle to use to do that was MOMAN – just even if it is for the survival of their businesses. So, we had a strategic review and MOMAN was restructured.
We have several committees in MOMAN now dealing with each aspect of our engagements with the various stakeholders, including government, the customers, the transporters, fuel tanker drivers, and the regulatory agencies.
As an approach, what MOMAN does is to analyse its engagements with these stakeholders and acquire the expertise that it needs to make sure that everybody understands, first of all, what the challenges in the industry are, and we engage in a conversation with experts, bringing our expertise to bear as well, as to the best ways of solving these challenges. That is what we have been doing for the past one year. The deterioration of degradation of the industry has taken place over a very long period of time; it will take a long time for us to get out of it.
We are just at the beginning, but at least, we have a plan in place, and we can see light at the end of the tunnel.
by ‘Femi Asu
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