Why Petrol Marketers Are Dumping the Business

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The idea for the fuel price hike that was recently embarked upon in the country was originally believed to be one that would bring about short-term hardships, but long-term sustainability.

Unfortunately, the marketers of petroleum products are suffering seriously under the short-term hardship and  is slowly squeezing them out of the business.

Independent marketers are especially finding themselves in danger and are gradually pulling out of the petrol sale business across the country as a result of the high cost currently required to run the business.

This is said to be due to the recent hike in the pump price of the PMS or petrol by the Federal Government and the removal of the fuel subsidy. This has apparently affected marketers also.

Another factor is the reduction in consumption of the product by members of the public. With the high cost of fuel, a lot of people are finding alternatives either by switching to diesel or just generally reducing consumption due to the fact that they can’t afford it anymore.

Government officials, experts and oil marketers have stated that the cost of  successfully operating in the downstream oil sector is double what it was before.

For example, according to the Punch,  Corporate Affairs Manager, Nipco Plc, an oil marketing firm, Mr. Taofeeq Lawal stated after the fuel price hike,  “Of course, the worst hit are the independent oil marketers and it is unfortunate,

“One thing that is prevalent now in the sector is that the number of operators is reducing by the day because of the cost implication in the business. To pick 33,000 litres of the PMS, you need about N5m, whereas in the past, it used to be about N2.7m. But right now, you need at least N4.7m to do that. So. the cost has appreciated and this has forced a number of operators out of the business.

“Also the average price you can get the PMS from any depot is N134 per litre and you can get 33,000 litres for one truck. The price of product to be loaded in a truck of this capacity used to be around N2.65m to N2.7m, but right now, it has risen to about N4.7m and this has really affected many marketers negatively.”

So this means that while the partial deregulation has made the product available, it has made it difficult for marketers to stay afloat businesswise.

The current instability in the foreign exchange market has not helped matters either. This is because a number of marketers are finding it tough to repay the loans obtained from banks, not to talk of garnering additional funds to pay for the PMS at its new rate.

All these factors have led to some sort of exodus from the marketing business which does not bode well for an already struggling economy.

 

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