The Nigerian Association of Road Transporters Owners (NARTO) has called on the Downstream, Midstream Regulatory Authority (DSMSRA) and other concerned federal government agencies to urgently increase the freight rate payable to its members that are transporting petroleum products in the country and as well rehabilitate the roads, saying her members are groaning under intense and harsh operating conditions occasioned by acute shortage of working capital for the efficient running of their operations.
The National President the association, Alhaji Yusuf Lawal Othman made the call on Thursday at a press briefing in Abuja. The NARTO president said the petroleum transporters cannot continue to run with the current freight rate and bad state of the roads and if the situation remains unattended to by the government, the association would have no choice but to park their tankers and withdraw their service, insisting that they cannot continue to operate at a loss.
The NARTO President said “as you are aware, one of the critical segment of our association, which is the transportation of petroleum products is carried out under a regulated environment. The payment of freight is regulated by the Downstream, Midstream Regulatory Authority (DSMSRA) based on the overall PMS pricing template; most often, without due regard to prevailing economic and market conditions. Worse still, these payments are received by transporters in arrears, usually 3-5 months after the products were delivered.
“In 2020, there was an approval by the defunct board of the Petroleum Products Pricing Regulatory Agency (PPPRA) to increase the freight rate by 26% for which the endorsement of the Hon Minister of State for Petroleum Resources was needed for implementation. However, the Hon Minister of State could not endorse the approval due to the obvious implication of its implementation that would result into either an outright increase in the pump price of PMS or lead to an increase in the subsidy on the product, neither of which the government was ready to do at the time.
“This situation generated a lot of tension in the downstream petroleum industry with strong possibility of industrial action from both NARTO and PTD/NUPENG. To douse this tension, the Group Managing Director (GMD) of NNPC intervened by suggesting two alternatives which include PPPRA to look into the possibility of accommodating an increase on the existing pricing template by reducing the share of government agencies on the template such as (a) PPPRA Funding, (b) NIMASA Charges, and (c) NPA Fees and secondly to revert to National Economic Council to inform it of the changes and the financial implication of the decision on the finances of the nation. Based on Presidential approval the first option was adopted by approving 10% to be implemented immediately while the balance of 16% was to be implemented based on the second option. To date this 16% is yet to be implemented.
Othman stated that since then, unfortunately, the economic circumstance in the country have not been better, whereas, the association’s operational costs keep growing up exponentially, noting that their truck replacement costs and operational costs are now unbearable. According to the NARTO President, truck head that was being sold for N20million in 2020 is now sold for N35million and Tank that was N8million is 2020 is now N15million. Adding that Tires that used to be N35, 000 in 2020 is now N150, 000, just as batteries that that used to be N32, 000 in 2020 is now N120, 000 and Diesel from N250 per litre in 2020 now sells for N420.
According to Othman, all the costs involve the use of foreign exchange to acquire, which transporters must source by themselves since they are not beneficiaries of the government official forex allocations, stressing that the cost of maintenance, such as spare parts, gear oil, lubricants, overheads among others is another challenges entirely different from the already mentioned cost.
He also decried the state of the roads, saying the bad roads is affecting their operations. He said “Although we commend the federal government for the NNPC Tax Credit intervention of N621billion for the repair of 21 roads, they should speed up with the awards of the contracts and exercise extreme care in the supervision, monitoring and payment so as to ensure value for money in contract execution. This becomes imperative to avoid substandard or poor work execution. In fact, we recommend that a committee comprising of stakeholders should be set up to help in the supervision and monitoring exercise to ensure speedy completion of the work before the rainy season.
“From these facts I that I have presented, it should be clear that the current freight rate payable is not only inadequate but unsustainable for our continued operation. There is no doubt that transporters would find it difficult to operate under this condition. For the records, I should emphasize the positive contribution of trucks to the efficient distribution of petroleum products across the country, despite the occasional problems associated with them. It is on record that over 98% of petroleum products are transported by road today. The pipelines have not been operational for years while the railways, despite their rehabilitation, are yet to commence.
“The current PMS scarcity is partly, caused by lack of funds to run the trucks profitably. Many transporters have decided to park their trucks, and I am sure that many more will park theirs in due course if something drastic about increasing the freight rate is not promptly done. Consequently, we would like to notify the members of the public that while we sympathize with them over the inconveniences that PMS scarcity might be causing them, we are constrained to inform them that if the situation remains unattended we would have no choice but to park our trucks because we cannot continue to operate at a loss”, the NARTO president said.