Home Business Subsidy may rise as fuel marketers demand higher margins
Subsidy may rise as fuel marketers demand higher margins

Subsidy may rise as fuel marketers demand higher margins

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The Federal Government may have to spend more on petrol subsidy as oil marketers in the country have called on the Petroleum Products Pricing Regulatory Agency to increase margins on the product now to prevent the a collapse of the nation’s fuel distribution system.

According to the petrol pricing template of the PPPRA, margins for retailers and dealers are N6 and N2.36 per litre while transporters’ allowance is N3.36 per litre.

Top officials of the Major Oil Marketers Association of Nigeria and the Independent Petroleum Marketers Association of Nigeria told our correspondent in separate interviews that a review of the margins was overdue.

The Chief Executive Officer and Executive Secretary, MOMAN, Mr Clement Isong, said the current margins were limiting marketers’ ability to invest in new trucks and the upgrade of filling stations.

He said, “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 margin today is not a luxury; it is a necessity, otherwise your fuel distribution system will collapse. It is collapsing already.”

He said the margins could be increased without causing any change in the pump price of petrol.

Isong said, “Currently, the price is N145 – which means that the government is funding the difference between the expected open market price (about N182) and the N145.

“If our margins are 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 signs 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.”

According to him, a truck should not be carrying petroleum products if it is more than 15 years old.

“But in Nigeria today, we have 40-year-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,” he said.

He added that Nigeria was lagging behind other African countries “because our fuel price is fixed.”

“We are behind because there is no investment in new trucks,” he said, describing the recent fuel tanker accidents in the country as too many.

“As MOMAN, we are very engaged with the government, the FRSC, the DPR; we are doing the best that we can to reduce the number of accidents using our expertise,” he added.

The National Operations Controller, IPMAN, Mr Mike Osatuyi, said, “It is overdue to increase marketers’ margins, including transport allowance. For over 10 years, the margins have not been increased.

“Inflation is increasing every year; so government has to know that the margins for all the stakeholders in the downstream sector have to be in line with inflation.”

The Federal Government had on May 11, 2016 announced a new petrol price band of N135 to N145 per litre, a move that signalled the end to fuel subsidy payment to private marketers.

The PPPRA also reviewed some of the components of the pricing template then. The retailers’ margin was increased from N5 per litre to N6; dealers’ margin rose from N1.95 to N2.36, and transportation cost increased from N3.05 to N3.36.

Data obtained from the PPPRA’s most recent petrol pricing template dated January 20 showed a breakdown of the cost elements for a litre of petrol.

According to the data, the cost of a litre of the commodity plus freight is N143; lightering expenses, N2.75; Nigerian Ports Authority charge, N0.84; and Nigerian Maritime Administration and Safety Agency charge, N0.22.

Others include jetty throughput charge, N0.60; storage charge, N2.00 and financing cost, N3.09.

The summation of all the above figures gave the landing cost of N153.39 for a litre of petrol.

The total distribution margin for the commodity was captured as N19.37.

A summation of the landing cost and the total distribution margin gives the Expected Open Market Price of the commodity, which the PPPRA put at N172.76, as of January 20.

The agency put the ex-depot price for collection of petrol at N133.28.

This indicated that the commodity was subsidised by N39.48 per litre.

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