FG to Move against Foreign Fuel Suppliers


By Ejiofor Alike, 10.05.2010 


The Federal Government has concluded plans to move against foreign suppliers of petroleum products, who are using their unrestricted access to the fuel-pricing template of the Petroleum Products Pricing Regulatory Agency (PPPRA) to rip off Nigerian oil marketers, THISDAY has learnt.


The newspaper gathered that the unrestricted access of foreign suppliers of petroleum products on the pricing template in PPPRA’s website is posing serious challenge to the government as marketers had alleged price manipulation by these foreign traders.Investigation also confirmed that these foreign suppliers are exploiting their access to this pricing template to rip off Nigerian traders.


An official of the Major Oil Marketers Association of Nigeria (MOMAN), who corroborated the marketers’ claim, told THISDAY that the foreign suppliers exploit their knowledge of the government pricing mechanism to increase hidden costs, which ultimately reduces the fuel marketers’ margins.
“They feel that since it is the Federal Government that pays Nigerian importers all the costs they incur in importation, they can exploit this to increase some of their charges, especially hidden costs such as cost of funds and demurrage. They are now coming up with high costs of funds and also accumulating demurrage, with the expectation that it is the Nigerian government that pays. But the implication is that it reduces our margins. They now want to remove our margin, which is the only thing that keeps us in the business,” he said.


It was learnt that the government is planning to restrict access to PPPRA pricing template until the downstream sector is deregulated to allow market forces to dictate the prices of petroleum products. But both the Nigerian marketers and the officials of PPPRA have expressed concern that any attempt to restrict the access of members of the public to the PPPRA pricing template could raise doubt on the transparency of the pricing mechanism.A top official of PPPRA confirmed to THISDAY that the Federal Government had mandated the agency to find ways of preventing the exploitation of marketers by foreign traders.


“The agency has been asked to examine ways of preventing the exploitation of marketers by foreign traders through openness of access to the pricing template, without compromising the transparency represented by such openness over the years. The proposal on the restriction of access to the template will therefore be considered on its merit by the agency,” he said. The components of the pricing template include the product cost; freight; lightering expenses; Nigeria Port Authority (NPA) charges; cost of fund for imported product; jetty depot thru put; storage charge and distribution margin.


Product cost is the monthly moving average cost of products cost as quoted on Platts Oil gram.Freight is the average clean tanker freight rate as quoted on Platts. It is the Cost of transporting 30, 000mt (30kt) of product from (North West Europe (NEW) to West Africa (WAF). The lightering expense is the cost incurred on the transshipment of imported petroleum products from the mother vessel into daughter vessel to allow the onward movement of the vessel into the Jetty.


Financing or cost of fund refers to stock finance for the imported product. It includes the cargo financing based on the International London Inter-bank Offered Rates (LIBOR) rates +5 per cent premium for 30 days.But marketers alleged that foreign traders exploit their unrestricted access to the PPPRA’s pricing template to manipulate the cost of funds and demurrage.





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