The extortionist character of petroleum products marketers

Sunny Nwachukwu (Loyal Sigmite), PhD, a pure and applied chemist with an MBA in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce. He can be reached on  +234 803 318 2105 (text only) or schubltd@yahoo.com

History is a very interesting subject. It reminds human beings of recorded events that can always be recalled to show exactly how they occurred in the past. The historical data of Nigeria’s hydrocarbon business in the downstream subsector, regarding retail outlets and pricing of petrol in various locations in the country, has always been characterised by a jet speed dispensing metre adjustments, “a shylock treatment model” with abnormally high upward price increases whenever there was fuel scarcity or something similar, which might occur for different reasons. Its reversal always seemed almost a mission impossible, even when situations that called for such price distortions were brought to normalcy. The reluctance of product marketers to adjust back to status quo whenever such incidents are addressed is one of the many burdens carried by the nation’s economy.

Such arbitrary and incessant price hikes, indeed provocation, have been in existence for long, and it is an established characteristic of the retail marketers; and always perpetrated against the numerous vulnerable products-consumers that are scattered throughout the entire economy. Take for instance, the most recent challenge faced by consumers as a result of the importation of poor quality PMS from Europe with very high concentration of methanol (as high as 20%, against the acceptable range of ~2% to 3%). The prompt withdrawal from circulation and distribution of this product had been ordered by NNPC Limited in the affected areas of Lagos and Abuja. The impact of the sudden scarcity this action created in the supply chain management of the products, by such momentary disruption in the distribution channels, is still lingering, and now manifesting by way of arbitrary pump price hike; ranging from N185 to as much as N300 per litre, in various filling stations nationwide.

The recorded trend of petroleum products pump pricing in Nigeria has exceptionally maintained a phenomenal, unrestricted extortionist tendencies. Petroleum products are known to be the only perishables that take such an inflationary quantum leap, in an uncontrollable astronomical pricing form and manner, in the whole economy, as if it were, indeed, an “essential commodity” that cannot be ignored or done away with, because it is tied to a daily economic factor of moving goods and services from one location to where they are needed for consumption. Be that as it may, this abnormal tendency to want to make quick money, by leveraging and taking such undue advantage should be strongly and severely discouraged in the economy.

One believes that such corrective measures could only be effectively implemented and achieved, specifically through an existing corporate governance of the affected trade unions in that particular industry or at such sectoral level; not necessarily by an organ of the government or a government agency, like the government’s Consumer Products Protection Agency or the industry’s regulatory authority, like NMDPRA. The reason for such strategic duty or assignment delineation is for effective monitoring and control mechanisms. And this is principally based on results-oriented action plans on getting things done properly, under stipulated guiding principles of management, in any particular system and or organisation.

A good example of what is being pointed out, discussed and shared, that could be mutually beneficial and be corporately useful for a macroeconomic impact on growth rate, is the 24 hours ultimatum given by the Nigeria Union of Petroleum and Natural Gas Workers, NUPENG, to petroleum products marketers on Saturday, 26th of February 2022, to revert to the official depot price of Premium Motor Spirit (petrol), to avoid the risk of unpleasant consequences. Such strong and powerful statement issued by NUPENG, which rightly pointed accusing fingers, and claimed that unscrupulous marketers are selling PMS from the depots at prices far above the official rate, thereby forcing illegal increases in the pump price that spirals and trickles down to compound the woes of the people in the midst of fuel scarcity is germane, life and direct. Through such moves and intervention, the economy could be delivered from unnecessary growth drag-forces that impact negatively.

The ongoing, incessantly adjusted pump price hike by the petroleum products marketers has a negative bounce on the speed of economic growth. It means the lowered gross incomes of the individual, local, smaller units of operators in any given sector cannot contribute to cumulative economic activities along the given chain. This further leads to not achieving the desired or targeted corporate goals for growth in the economy.

Take the agricultural sector, for instance. The peasant, smallholder farmers, will definitely be unable to cope with the price hike madness that disrupts their programmed operational costs for supply of agricultural produce along the supply chain. This change in action affects the speed of activity flow, which ultimately slows down productivity. Such shouldn’t be allowed to happen in a forward-looking economy.

At a glance, analysing the trend of rising crude oil prices in the international market, which has already hit an all time high of $113 per barrel, (partly due to the invasion of Ukraine by Russia), you’ll find that such raw material price rise will surely affect the price of refined products subsequently, when production cost analysis is put into consideration. For an economy like Nigeria, (though a developing country), the attractiveness of what the rising crude oil prices throw up could be taken advantage of in a two or three dimensional approach.

Firstly, to capitalise on it at the export end, by the Nigerian Upstream Regulatory Commission, working to raise both the foreign reserves and also improve on the purse and savings of the nation’s Sovereign Wealth Funds.

Secondly, to stabilise the economy from the advantages of lowering ‘production costs’ of made in Nigeria goods and services, meant for exports. By pricing strategies, such non-oil goods for exports are already at advantage against their competing contemporaries from other economies, should all the Nigerian local refineries become operational and adequately service the internal needs and demands of products in the economy.

Thirdly, the kind of wastes the economy suffers presently, through forex leakages that ought to have been conserved and reserved in the nation’s current account (foreign reserves), if Nigeria wasn’t importing the refined products for her daily domestic consumption. For instance, the July – December appropriated petrol subsidy amendment as already proposed to the National Assembly at N2.557 trillion; the amount spent on fuel imports in 2021, that amounted to a whopping total sum of $1.04 billion. All of these, cumulatively contribute to the annual loss of value of the nation’s currency, the Naira, being devalued at 10.6 percent, according to IMF.