Key points
- IPMAN has advocated the establishment of a specialized oil and gas bank or petroleum energy bank to provide easier access to credit facilities.
- The association stated that the cost of purchasing 45,000 litres of petroleum products rose from N8 million to over N50 million post-subsidy removal.
- National Publicity Secretary Chinedu Ukadike noted that the monetary value of petroleum products increased by over 400 per cent immediately after deregulation.
- Independent marketers alleged unhealthy competition from depot owners and importers who undercut retail prices at their own outlets.
- Independent operators are buying in smaller quantities to mitigate heavy losses caused by sharp price fluctuations during product transit.
Main Story
The Independent Petroleum Marketers Association of Nigeria has advocated the establishment of an oil and gas bank or petroleum energy bank.
The National Publicity Secretary of IPMAN, Mr Chinedu Ukadike, made the call in an interview with the News Agency of Nigeria on Tuesday in Abuja. According to him, such bank would provide easier access to credit facilities and help stabilise the oil sector. He identified inadequate financing, high interest rates, price volatility and limited supply sources as major challenges confronting independent marketers in the downstream oil sector following the removal of fuel subsidy.
The report indicated that the removal of the subsidy led to a sharp increase in the cost of petroleum products, placing heavy financial pressure on marketers. He explained that the cost of purchasing 45,000 litres of petroleum products rose from about N8 million to over N50 million after deregulation. To keep their filling stations running under these capital-intensive conditions, many independent marketers are now pooling their resources to co-purchase products from depots. The association maintained that the full rehabilitation of domestic refineries is vital to create supply alternatives and curb ongoing price instabilities.
The Issues
- Massive 400 percent liquidity requirements lock smaller independent retail operators out of bulk procurement, threatening the survival of rural filling stations.
- Unfair market competition allows dominant product importers to supply their own retail lines at lower rates while inflating wholesale prices for independent buyers.
- Rapid price drops during the transit window between depot loading and retail delivery expose marketers to immediate capital investment losses.
What’s Being Said
- “Immediately after the subsidy removal the monetary value of products increased by over 400 per cent,” stated IPMAN National Publicity Secretary Mr Chinedu Ukadike.
- Ukadike added that “it made it difficult for many independent marketers to sustain operations. One of the major challenges in the oil sector is finance for independent marketers.”
- “Before you get products to your station the price may have crashed and you lose your investment. That is why many marketers now buy in smaller quantities,” he explained regarding market volatility.
- “Marketers who are supposed to be a beautiful pride in deregulated economy are no longer so because we have only one source of petroleum product, suppliers. So, whenever the suppliers sneeze there is a problem,” Ukadike noted on supply monopolies.
- “When petroleum products are being imported, and we go and buy, at the end of the day, our managers will be arrested and will spend a lot of money,” he alleged regarding product quality and harassment issues.
What’s Next
- IPMAN executives will continue to lobby the Federal Government and monetary authorities for the creation of a dedicated energy sector financing framework.
- Independent marketers will expand resource-pooling strategies and adjust their daily retail inventory purchases to hedge against pricing drops.
- Downstream regulators will face increased pressure to investigate pricing disparities and alleged anti-competitive practices by major depot owners.
Bottom Line A staggering 400 percent jump in product procurement costs following deregulation has prompted IPMAN to demand a dedicated petroleum energy bank, aimed at protecting independent marketers from severe credit crunches and predatory pricing by dominant importers.
