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Scarcity of petroleum products: Two opposing views

12 June 2019 at 15:17 | 1705 views

Editor’s Note: There is currently a scarcity of petroleum products in Sierra Leone. It looks like the suppliers want to increase prices while the government does not want to do so. Here are two opposing views on the issue. The first view seems to favour a price increase and the other one seems to oppose it. Readers can judge or do their own assessment.

NP Loses Le96B between January to May 2019

By Ranger, Freetown

In connection with recent hiccups in the supply of petroleum products particulary as it concerns National Petroleum Sierra Leone (NP-SL) it has been learnt by this medium that NP SL Limited recorded a massive loss from January to May 2019 to the tune of over Le 95 billion (Ninety five billion Leones).

This is as a result of the huge difference between the actual price of PLATTS and the average purchase price of USD $ to the Leone when matched against that of the Petroleum Regulatory Agency Pricing Formula.

Other related challenges recorded by NP-SL Limited uncovered by this press that is seriously affecting the status qou include but are not limited to variations in the actual price quoted on PLATTS and the PRA,variation in the actual market price of USD and PRA pricing formula. The NP-SL as a result is currently paying an average of Le9,000 to $1 (USD) as compared to L8,600 to $1 (USD) in the PRA Pricing Formula. Another challenge facing NP-SL Limited is volatility and unavailability of US Dollars to effect transactions.

The rippling effect of the above is such that NP-SL Limited currently owes its suppliers over $42M which NP-SL Limited is challenged to honor.

It could be recalled that over the past years when the industry was faced with some challanges and in order to avoid a crisis the Governement would step in to subsidise the prices of petroleum products to ensure that the pump prices are at affordable level to the general populace.

However, if that route is not desirable, the Goverment increases the pricing regimes to reflect the real market prices of petroleum products in the market, to ensure the industry does not collaspe. As it is right now, Oil Marketing companies are subsidising virtually all sectors in the industry to the deteriment of its own survival. ‘This trend should be reversed immedaitely,’ said a driver who owns a fleet of vehicles.

In addition, the nature of NP-SL’s business is such that NP-SL imports petroleum products in US Dollars, sells in Leones and has to then convert the Leones into US Dollars to continue the buying and selling processes all over agian. However, according to NP-SL, it is regretable that the company is finding it extremely difficult to purchase US Dollars in the market place currently. It is a fact that over the years, NP-SL received tacit support from the central bank even though the amounts normally received were inadequate.

Though it is not the business of the governemnt to provide foreign currency for businesses, but due to the fact that NP-SL’s demands a fluid situation, the company has over the years appreciaited this gesture.

However, NP still craves efforts by the central bank to develop a mechanism where foreign currency is provided for the oil marketing companies to enable them pay for badly-needed petroleum products.

It is understood that NP-SL is a strong believer of the digital revolution and welcomes the introduction of the ASSYCUDA software in their operations. However this press learnt that the method of implementation is impacting negatively on NP-SL’s speed to market initiatives; the reason why it is recommendable that the relevant authorities build solid capacity amongst their team to ensure seamless flow of products free of interruption due to the implemetation of the ASSYCUDA system.

The current pricing fomula dictates that the pump price of petroleum products be adjusted upwards or downwards periodically as and when the combined effect of the changes in world market prices (quoted in PLATTS) and the exchange rate (measured by the average selling rates quoted by the Oil Marketing Company, commercial banks and Bank of Sierra Leone) cause a +/- 5% change in the Leone-Based landed cost of the product (s).

This Trigger Mechanism needs to be looked into so that prices should be changed upwards or downwards in small increments that will not create panic in the market place. The way it is currently, allows for a big jump at anytime which makes it difficult for Governement to effect change at the right time.

This medium also learnt that also affecting the NP-SL’s working capital and cash flow, is the fact that the company is owed by the Ministry of Energy that is yet to liquidate such amount which is negatively effecting NP-SL’s ability to purchase much-needed petroleum products. Despite requests by NP-SL for this issue to be resolved immediately to put the company in better stead to be able to operate without strain, not much has been achieved in this direction.

As all of this is going on, NP-SL is further encumbered with other charges that are not provided for in the price build up fomula, and these include: Toll Gate fees, ASYCUDA processing fees, Environmental Protection Agency fees, storage fees and other fees imposed by the Petroleum Regulatory Agency.

And here is the other viewpoint:

NP’s Le 90B Loss: Crying Wolf Where None Exists.
A rejoinder to Ranger By Josephus Koroma

It is a sad story that today, NP which is, or should be a national petroleum company, is collaborating with other international petroleum companies based in Sierra Leone, to blackmail Government into increasing the pump price of fuel.

Despite the fact that all Sierra Leoneans know NP is managed by die hard APC loyalists, national interest should be paramount rather than party interests. So as a strategy to distract government’s attention from implementing its flagship program of free quality education, the APC party has now turned to their surrogates to blackmail Government and hold the people of Sierra Leone to ransom. How can one be so petty to wish evil on the country of your birth just because your party is not in power? But this is exactly what the APC and their cohorts have been manifesting since President Bio won the elections of March, 2018. It is now evidently clear that NP is so deceitful in its approach that they are currently using the dubious fuel deal that was in operation between NP General Manager and Henry Macauley during the days of APC to blackmail Government.

When Alhaji Kanja Sesay took over as Minister of Energy, he inherited fuel debt between NP and EDSA/EGTC of over Le40.0 billion plus debt owed to the famous Aggreko, Salcost Salini. All Sierra Leoneans knew the debt of NP was dubious in more ways than one. When requested to show documentations of their accumulated debt, not a single document was provided by the management of NP. All they could provide was a mere invoice paraded by the General Manager. In fact, out of good customer relationship the Minister was able to reduce the debt and make some savings for Government.

Another dishonest business behavior of NP is the secret relationship between NP, Leonco, ADDAX and a company called Oxgy. With all their claims of being a giant in the industry, NP does not import oil into Sierra Leone despite the huge foreign exchange availed to them occasionally by the Government of Sierra Leone. Instead, NP and Leonoil buy fuel from another family company Leonco. It is also reported that Leonco actually imports fuel oil from another company called Oxgy. In all the deals, Government and the people of Sierra Leone are the losers.

The present fuel crisis is championed by NP General Manager, Kobi Walker, a proud financier of APC to blackmail Government. From the article written by the so called Ranger, an APC mouthpiece, NP is complaining about ASYCUDA, debt and foreign exchange problems. Citizens can recall that NRA, in its automation drive to make tax collection fraud free, installed a web based ASYCUDA-World in January 2019. Before then, oil marketing companies import of fuel products were dubiously stated, and as a result, wrong taxes were paid.

According to sources from customs department, NRA rolled out the ASYCUDA World to all oil marketing companies in May. Because the software eliminated the dubious measurement of fuel imports and paying correct taxes and duties, NP is leading their subdiary, Leoneoil managed by the son of the owner of NP Tunde Cole to blackmail Government.

The author is also claiming that the formula used by PRA is not correct. This is false. The current PRA Chief Executive is an expert in the oil industry. Since his appointment late last year, he has discovered a lot of hidden charges that disadvantaged government. The pump price of fuel is determined by many factors including exchange rate, international fuel prices and freights. The exchange rate since January has depreciated by 4.5%. But NP is using black market exchange rate of 9,000 Leones per 1$ dollar to compute its price and call for price increase. We challenge NP to produce a bank rate of Le9,000. Even black market is not Le9,000. Besides Government through Bank of Sierra Leone has provided over $15.0 million to oil marketing companies, so NP is not saying the truth.

Another discovery the dynamic head of PRA has discovered is the freight price. It is discovered that the freight price used by NP and others is $85 per metric ton - a charge that was set in 2015. Despite all efforts, oil marketing companies have vehemently insisted that freight prices never change despite the fact that Sierra Leone has been removed from the list of fragile states, and all international insurance premiums are expectedly reviewed downwards. Asked to give evidence of the freight from their suppliers, the companies, according to our sources say their suppliers don’t provide them freight prices. A leaked document from one of the companies shows that the freight for petrol is less than $60 instead of the exorbitant $85 per metric ton they actually use to defraud Government of meaningful resources. In fact the disclosure of the dubious deal is not unrelated to the immediate withdrawal of the Country Manager of Total from Sierra Leone. Now the General Manager of NP, a Sierra Leonean who is drunk with the politics of SLPP vs APC is doing someone’s bidding by attempting to blackmail government.

@At Coalition of Civil Society Movement for Petroelum Industry in Sierra Leone