In a recent media statement, Shina Amoo, the Chairman of the Independent Petroleum Marketers Association of Nigeria (IPMAN) at Ore Depot, expressed concerns about the challenges faced by fuel marketers in Nigeria following the government’s decision to deregulate the petroleum sector by removing fuel subsidies. According to Amoo, the absence of active local refineries has complicated the business landscape for petroleum marketers in the country.
Amoo highlighted the dire situation, stating that government-owned depots have been abandoned, many marketers have been left idle, and some have even sold their stations or put them up for leasing. Additionally, the much-anticipated Dangote Refinery is not yet operational, exacerbating the woes faced by the industry.
“Deregulation is the best regime in our sector,” Amoo remarked. “But the problem with this current regime is that our refineries are not working. Dangote, which we believed in as a game-changer, is not ready.”
The IPMAN Chairman further emphasized the deteriorating infrastructure, stating, “All government-owned depots are abandoned. All the pipelines have been vandalized. There is no solution to the free flow of the product in the country. We are still on importation.”
Amoo elaborated on the financial challenges confronting petroleum marketers, explaining, “Before deregulation, we could get petrol at N172 and sell at our stations for N190 or N195. From the margin of N23, we paid for transportation and other logistics and had a small profit. But now, we buy at N580 from private depot owners. How do we make a profit? Many of the private depot owners are selling to us at their pump price, not ex-depot price.”
To address these challenges, Amoo proposed government intervention, suggesting that “the government can come to our aid and allow independent marketers to operate” by creating a depot system that allows for competitive pricing.
Additionally, Amoo advocated for the inclusion of petroleum marketers in the government’s Compressed Natural Gas (CNG) plan, designed to provide a more affordable alternative to petrol. He suggested, “The government can give us a grant for Compressed Natural Gas (CNG) conversion through a development bank. On the CNG, the government should support us to engage in gas sales to compensate for the loss of revenue from fuel.”
Amoo’s remarks come amidst announcements from Heineken Lokpobiri, who stated that the Port Harcourt refinery is expected to be operational by December 2023, followed by the Warri refinery in the first quarter of 2024 and the Kaduna refinery towards the end of 2024. Lokpobiri underscored the government’s commitment to reducing petroleum product imports and boosting local refining capacity.
The Nigerian petroleum industry finds itself at a critical juncture, with the need for swift and effective solutions to ensure the viability of petroleum marketers and the successful development of local refining capabilities.
Amoo’s concerns reflect the broader challenges faced by Nigeria’s petroleum industry. Deregulation, while theoretically beneficial for market competition, has placed a heavy burden on independent marketers. The high cost of importing fuel due to the absence of functional local refineries has driven up prices, resulting in diminishing profit margins for marketers.
The current predicament raises questions about the long-term sustainability of Nigeria’s petroleum sector, which plays a pivotal role in the country’s economy. The government’s plans for refinery development, including the Dangote Refinery, have been touted as potential game-changers, but delays in their operationalization have left the industry in limbo.
Furthermore, the sorry state of government-owned depots and pipelines has exacerbated the challenges faced by petroleum marketers. The abandonment of these critical infrastructures has disrupted the supply chain, leading to inefficiencies, higher costs, and logistical nightmares for businesses operating in the sector.
As Amoo rightly points out, the key to resolving these issues lies in the government’s intervention. By revitalizing government-owned depots, repairing pipelines, and facilitating the development of functional refineries, the government can create an environment where independent marketers can thrive.
Moreover, Amoo’s suggestion to involve petroleum marketers in the government’s CNG plan presents a viable solution to the issue of rising fuel costs. Compressed Natural Gas has the potential to become a more cost-effective and environmentally friendly alternative to traditional petrol. Supporting marketers in transitioning to CNG distribution can contribute to lowering prices for consumers while reducing Nigeria’s reliance on imported petroleum products.
Heineken Lokpobiri’s announcement regarding the expected completion dates of the Port Harcourt, Warri, and Kaduna refineries brings a glimmer of hope to the industry. These refineries, once operational, can significantly reduce the country’s dependence on fuel imports, stabilize prices, and provide a boost to local refining capacity.
The challenges faced by Nigerian petroleum marketers in the wake of fuel subsidy removal and the absence of functional refineries are multifaceted and deeply concerning. The government’s commitment to addressing these issues through infrastructure revitalization and support for alternative energy sources like CNG is crucial for the industry’s future. The successful development of local refineries will not only ensure a steady supply of fuel but also foster economic growth and stability in Nigeria. The government’s role in facilitating these changes will ultimately determine the fate of the country’s petroleum sector and its impact on the broader economy.