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NNPC has stifled oil marketers out of AGO importation – operators

…Corporation says marketers not importing are seeking higher margin

The Nigeria National Petroleum Corporation (NNPC) has allegedly driven oil marketers out of the business of importation of Automotive Gas Oil (AGO) or diesel by making it uncompetitive for them to engage in.

Even though AGO is a deregulated product that any oil marketing company can bring into the country and sell at a competitive price, a cross-section of the market operators who spoke to BusinessDay said some of them had tried to import the product but had their fingers burnt because of the interference of NNPC in the market.

An industry source told BusinessDay that oil marketers who brought cargoes into the country in the recent past are yet to recover from the losses they incurred.

Another operator said his company tried to bring in the product but discovered that its price was more expensive than that of NNPC.

Clement Isong, chief operating officer, Major Oil Marketers Association of Nigeria (MOMAN), said the risk of importing the product was too high for his members and so they all prefer to buy from NNPC and sell to the public.

Some other operators said that the problem was not so much about access to foreign exchange as being speculated in some quarters, but more about the fact that those unlucky to import the product into the country at a time NNPC does risk losing the entire cargo because of the price difference.

The marketers alleged that NNPC does not sell the product in the open where more stakeholders can participate and the corporation does not sell to them directly but they rather buy from third parties. They further said NNPC sells the product at about N200 per litre or more than that to its friends while the marketers in turn buy from those friends at between N210 and N230.

They also alleged that the corporation claimed that it entered the business, despite the product being deregulated, in order to crash the price of the product which it said was going beyond what local consumers could purchase as the price of crude oil has direct effect on the cost of the product.

But Ndu Ughamadu, NNPC group general manager, public affairs, said the corporation has the responsibility to sell the product at relatively low price to ensure that PMS transportation is not over-burdened with higher prices.

“Any marketer can import and sell at reasonable price like NNPC. Those who don’t want to import are looking for higher prices or margin at the expense of consuming public,” Ughamadu told BusinessDay on phone, Monday.

He further said the product is being sold to depot owners and independent marketers who have sales and purchase agreement with NNPC and not to friends.

Meanwhile, NNPC claimed it has saved $2.2bn through the Direct-Sale-Direct-Purchase (DSDP) scheme of petroleum products supply since its inception in 2016.

Maikanti Baru, group managing director, NNPC, said this at the public opening of bids for the 2019 term-contract for lifting crude oil and petroleum products under the DSDP scheme.

He said 29.5 million metric tonnes or 39.6 billion litres of petroleum products had been supplied under the scheme, representing 90 percent of the nation’s requirements.

Highlighting other benefits of the scheme, the NNPC boss said  its competitive pricing framework which is lower than the Petroleum Products Pricing Regulatory Agency’s (PPPRA) benchmark, led to about 84 percent reduction in products demurrage cost.

He explained that the public bid opening exercise was in keeping with President Muhammadu Buhari’s transparency and anti-corruption stance which the corporation had imbibed and championed relentlessly under his stewardship.

He said the objective of the DSDP scheme was to engage reputable and qualified companies and ensure that selection of off-takers was carried out in a transparent and accountable manner in compliance with the Public Procurement and Nigerian Content Acts.

He noted that the ultimate aim of the scheme was to ensure value optimisation to the federation.