Financial Crisis Hits Oil Traders As Subsidies Gobble Up N1tr | The Guardian Nigeria News


The federal government may have spent around N1 trillion to subsidize 102 million liters of Premium Motor Spirit (PMS) in a matter of months, as current challenges are pushing downstream operators of the country’s oil industry to a liquidity crisis.

While Nigeria already subsidizes almost all of the volume of PMS commonly referred to as gasoline consumed by the West African region, industry players yesterday told the Guardian that the federal government could pave the way for smuggling and falsification of products in the region given the problems of the downstream sector of the country.

In addition to the impending layoff of workers and poor safety practices caused by recurring fires at stations and roads, stakeholders claimed that more than 35% of them, especially independent traders, had been evicted.

The managing director of the Nigerian National Petroleum Corporation (NNPC) group, Mele Kyari, had called for gasoline to sell for N 256 per liter in the country, adding that around N 150 billion were paid monthly in the form of grant.

Between January and June of this year, the subsidy amounted to around 900 billion naira. As the country’s daily fuel consumption level stood at around 60 million liters in January, the company said the trend then increased by 102 million liters.

With the continued rise in the price of crude oil on the international market, which stood at $ 76 per barrel yesterday after jumping to around $ 30 per barrel about a year ago, the devaluation of the naira, which has almost doubled and remained unstable, as well as the fluctuations in the pump price of gasoline, the state oil company retained its status as the sole importer of the product.

The Pipeline and Products Marketing Company (PPMC) sold the merchandise to retailers at N 148 per liter, but traders said the throughput generally pushed the wholesale price to over N 157 per liter, including the cost of transportation and union dues.

The development thus creates a marginal gain of around 5 N per liter, which can in fact be spent on other charges, notably operating expenses. Most stakeholders have said this challenge makes smuggling and adulteration flourish, as traders move black gold to neighboring countries where it goes up to N400 per liter.

Up to 35% of oil traders, especially independent traders, have already closed their facilities, as bank financing weakens amid bad loan repayment agreements.

In March last year, the Minister of State for Petroleum Resources, Timipre Sylva, announced that the downstream sector had been completely deregulated and that subsidies would no longer be paid on oil, especially since the budget no. was not provided for in the 2021 credit for this. Many Nigerians did not know the minister would overthrow.

While the price of crude was at an all time high, the government reduced the price at the pump, but as the situation improved in the international market, prices gradually increased, causing a reaction from the public.

Deregulation was immediately halted as unions stalled with the government. A dialogue has been engaged between the unions and the government for more than four months. Without a budget allocation, the NNPC began to cover the differentials resulting from the cost of landing and the price at the pump. The direct implication being the incessant borrowing and the exhaustion of foreign direct investments.


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