By Alhaji M Jalloh
In connection with recent hiccups in the supply of petroleum products particularly as it concerns National Petroleum Sierra Leone (NP-SL) sierraleonews.com learnt that NP SL Limited recorded a massive loss from January to May 2019 to the tune of over Le 96 billion (Ninety-six 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 quo 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 Le 9,000 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 honour.
It could be recalled that over the past years when the industry was faced with some challenges and in order to avoid a crisis the Government would step in to subsidize 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 Government increases the pricing regimes to reflect the real market prices of petroleum products in the market, to ensure the industry does not collapse. As it is right now, Oil Marketing companies are subsidizing virtually all sectors in the industry to the detriment of its own survival. ‘This trend should be reversed immediately,’ 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 again. However, according to NP-SL, it is regrettable 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 government 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 appreciated 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 implementation of the ASSYCUDA system.
The current pricing formula 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 any time which makes it difficult for Government 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 formula, and these include: Toll Gate fees, ASSYCUDA processing fees, Environmental Protection Agency fees, storage fees and other fees imposed by the Petroleum Regulatory Agency.