Only Delivery Of Modular Refineries Can Address Petroleum Pricing Challenges — IPMAN President
Posted: 05/Aug/2020

The issues surrounding petroleum pricing in the country have generated controversies from various quarters, especially with the new Market Based Pricing Regime for Premium Motor Spirit(PMS), handled by the Petroleum Products Pricing Regulatory Agency(PPPRA). In this interview, National President of the Independent Petroleum Marketers Association of Nigeria(IPMAN), Mr. Chinedu Okoronkwo, speaks on solutions to the pricing challenges among other issues. ADETOLA BADEMOSI presents excerpts.

THERE have been various controversies surrounding the deregulation of the sector as well as the monthly review of fuel price based on market indices, what is IPMAN’s position on this?

When something is about evolving, there are processes. I think what the government is doing now is a situation where people will begin to, on their own, see how they can cope. There have been a lot of issues because when you say you have deregulated, why are you still controlling the price? But the PPPRA said no, they are not fixing the prices but they are just saying this is what the price should be; all things being equal. But all things cannot be equal. So our take on this is that the government should see how they can encourage people to begin to build modular refineries because if we do not produce this thing locally, we won’t be able to address these issues. Moving forward, what IPMAN said earlier is that we are in support of deregulation, because even with subsidy removal, we are not the ones benefiting from it. We are even suffering. Subsidy is for those who have cash to put in. The Government is subsidising for people with a lot of cash, our profit is our concern. Each time there is an increment, our profit does not go up and the ease of doing business is becoming very difficult. It is affecting us. A situation where you are for instance, buying a product for N3million and any increment comes, you now get it for N4 to N5 million with the same profit margin of N7 to N10, it is difficult to cope. Some of the filling stations you see that are not running properly now, that is the reason.  But with the whole thing, I think the government is looking at how to encourage people to do this business locally, to encourage people on how to think about building refineries. Very soon, Dangote will come upstream and the market will open. It is not for only Dangote, small refineries can also come up but they need to be encouraged, there should be some incentives, the PIB should be in place, they should pass it so that this sector will open up. People can put up refineries that will provide 12 trailers daily. Crude is here, it is not a big deal.

Our take on it is that the government should help investors to build local refineries, within three months, we can develop them. You can imagine if a Local Government Area has like 6 modular refineries,  the issue of pricing will no more  be there because our prices will no longer be determined by dollar exchange rate, it will now be seen as a local product here.

The government has been on building of modular refineries for a while now, but this seems to be talks alone with no action, what do you think are the issues hampering the delivery of modular refineries?

At the last meeting we had with the Ministry of Environment on how to discourage vandalism and encourage local refineries,  government said people in oil producing communities can form cooperatives rather than vandalising pipelines or destroying the environment. They encouraged them to put up something in the idea of modular, where owners have some shares, the  government will have  its, IPMAN, being a major up-taker will have some shares. NOSDRA is heading this and I think very soon, they will come up with a blueprint on how this is going to work. If it happens, it will have a lot of benefits. One, it will now discourage vandalism and killings. Look at the remediation efforts in Ogoni, for cleaning up just the place the cost is $1billion and this might not even be enough. So, if you  want to discourage people, you should put something that will encourage them. The outcome of the meeting was delayed because of this COVID-19 but we have been having discussions on the phone. By the time we don’t protect the environment, a lot of things will go wrong. When this government banned rice importation, we didn’t know what it would do with us, how would we have coped with COVID-19 if we were  to still import?  Now, we are beginning to see the need to encourage local production. That way, it will reduce the pressure on the dollar.

Petroleum is based on dollar and import. But by the time we begin to do this thing locally here, this will widen the employment opportunities and the economic activities will also improve. If we programme ourselves properly, Nigeria has a lot of empowering initiatives. Modular refineries, the government can bring those refineries working overseas to put them here and under three months it is up and running. There is nothing too big in that. By that time, we will not be going for exchange rates to get petroleum products.

The monthly fuel price fixing began in May which saw a decrease in fuel price to between N121-N123 per litre and in June, it was N140-N143,

Cuts in….They said they are not fixing price,  that they are just suggesting to marketers!(laughs).

But marketers are expected to sell only within the price band?

Even if you sell below price, they have not come, so why are you below price. If you go round, you will see people selling N140 some are even selling N139 so that they sell out, then the volume, they look at the volume. That is what they are telling you that given this, given that, given the exchange rate today, this is what the price should be. That is just telling you what the system will look like. It is not like they are fixing prices for me, because they said they are telling Nigerians so that some marketers will not take advantage of the people. They are giving a band, that is a lower and upper band, so that if you sell at prices within the band, you still get your profit. That is the way they are putting it. But like I told you, the best way to solve this is if we begin to refine this commodity locally.
 
Recently, the NLC advocated a downward review of fuel prices on the perception that the increase in price is going to enrich some oil marketers?

It is not good to cast aspersions on something you cannot substantiate. We have FOI. As a big organization like that, if they have these marketers, expose them, why are you hiding them? For us, it is not enough to begin to join issues with them because we have told you what we are facing right from the same market. The price is fixed like any other thing and NNPC that is the major supply of these products, they tell you this is our price, if you go to some of these importers too, for now I don’t think they have started disposing petroleum products, reason could be as a result of the exchange rate, but the same market everywhere, so if there are advantages they have seen, which I have not seen anywhere, let them make it public. What I am saying is that they should substantiate these allegations with proofs so we can look at them.

There are reports of a possible scrap of the Petroleum Equalisation Fund (PEF) with the deregulation of the sector and marketers, including IPMAN, have vowed to kick against this. Although this is still a speculation, what is the Association’s position on this?

It is good to school people on what PEF is, it is marketers’ money, the government’s kobo is not in that fund. It is our contribution, if the government feels that they can no longer manage it for us, they can raise a team. Look at Coca Cola, the price is the same everywhere, the amount you buy it in Lagos is the same in Jos. This money is for marketers, they should ask us what we want to do with it. It is marketers’ contribution. If that is what they want to do, they should call us and tell us to find our way. We can also come up with a system we think will be good for us. But a situation where people are looking at equalization fund as if it is government money should be discouraged. It is from that money they will say, for this product maybe for you, this is the amount for transportation. These are the calculations the PPPRA will suggest to them.