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Tuesday, February 7, 2023

NP Laments Le96B Loss in 5 Months

HomeAYV NewsNP Laments Le96B Loss in 5 Months

NP Laments Le96B Loss in 5 Months

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It was additionally learnt that National Petroleum – Sierra Leone which is the biggest indigenous supplier of petroleum in Sierra Leone is further encumbered with extra charges that are not provided for in the price build up formula. These extra charges include: Toll Gate Fees, ASYCUDA processing fees, Environmental Protection Agency fees, storage fees and other fees imposed by the Petroleum Regulatory Agency. At the same time, NP-SL is also suffering from lack of much-needed funds since the Ministry of Energy failed to honor its legitimate debt owed NP-SL, to the tune of $1.3M for the past one year now.

Other related challenges recorded by NP-SL Limited uncovered by this press that are seriously affecting NP’s status quo include but is not limited to variations in the actual price quoted on PLATTS and the PRA (Petroleum Regulatory Agency), 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. 

This is as a result of the huge difference between the actual price of PLATTS and the average purchase price of the USD dollar to the Leone when matched against that of the Petroleum Regulatory Agency Pricing Formula. 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.
Furthermore, it could be recalled that over the past years when the industry was faced with some challenges, 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 for consumers.

However, when that route is not feasible, the Government increases the pricing regimes to reflect the real market prices of petroleum products in the market to ensure that 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 if oil companies are to thrive and we consumers are not to suffer,’ the owner of a fleet of vehicles commented.

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 process all over again. However, it is regrettable that the company is finding it extremely difficult at the moment to purchase US Dollars in the market place. It is a fact that over the years, NP-SL received some support from the central bank even though the amounts normally received were inadequate and though it is not the business of the government to provide foreign currency for businesses, NP-SL appreciated the government’s gesture over the years.

However, for this issue to be settled amicably, it would be prudent on the part of 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 teams to ensure seamless flow of products that is free of interruption due to the implementation of the ASSYCUDA system.

Meanwhile, the current pricing formula dictates that the pump price of petroleum products should 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 government to effect change at the right time.

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