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The Problem of Free Petrol in Nigeria by Mannasseh Egedegbe



That’s right. You can actually get free petrol in Nigeria if you are lucky enough to be at a fuel station that is selling petrol at more than N145.00 per liter when the Nigerian National Petroleum Commission (NNPC) comes visiting.

Nigeria is a wonderful country, I tell you. We believe that market forces are like witches and wizards from the legendary Nigerian villages that have been sent to oppress the poor and suck our destiny dry.

So the back story is that the NNPC has been going on raids to clamp down on petrol stations that are selling fuel above N145/liter. Once they get there, they give all motorists who are there free petrol until it finishes. So you get free petrol, as much as you want, and when it finishes, you go back to the queue for more. The issue of fuel scarcity has not been resolved — it was just made unwittingly harder. Petrol stations are simply going to start hoarding the limited product they have now and sell only in the dead of the night. Yep, that is the true definition of ‘black market’.

So let’s talk about market forces, demand and supply, and how the cost of ‘free petrol’. Don’t worry, I am going to make microeconomics as engaging as possible, so stay with me.




Once upon a time, the picture above was the equilibrium price for petrol in Nigeria. At N145/liter, Nigerians consumed about 40 million liters of petrol per day. At this point, supply and demand were at equilibrium and the petrol sector of the economy was ticking over at N5.8 billion revenues per day.

Then the music stopped.


We started hearing stories and grumblings that landing costs of one liter of petrol was now N170. Just like that. And we were busy paying N145. The signs were ominous and it became apparent that a scarcity was on the way. First petroleum marketers were blamed for hoarding products, and then Nigerians were blamed for panic buying. Meanwhile the queues got longer. What just happened?


Apparently, the landing cost of petrol has jumped to N171. If the landing cost has gone up, then for petrol marketers to make any kind of meaningful profit, the pump price would have to be somewhat higher than N171. Well, because the regulated price remained at N145, petroleum marketers stopped importing petrol. Before now, petroleum marketers provided 80% of Nigerian’s daily needs, according to DAPPMA. So, if DAPPMA owned 80%, that means NNPC could only supply 20% of Nigerian daily needs, which accounts for 8 million liters per day.

Now, there is a supply shock. Look at the last picture above. Supply shock means that the supply curve will move left from Supply 1 to Supply 2. The supply curve will move along the demand curve, thus moving the from Equilibrium E1 to Equilibrium E2. At E2, the price of petrol has to go up, according to the law of supply and demand, until demand drops to 8 million liters per day. At this point E2, the price should be somewhere around N200 per liter or more. So we are looking at a margin of around N29 per liter or more to cover for costs of transportation, taxes, other levies and profits.

This is how supply shocks affect economies. Assuming a pump price of N200 per liter, all of a sudden, the vibrant downstream petrol sector that was ticking merrily at N5.8 billion per day has dropped to about N1.6 billion.


In a market driven economy, it will be difficult for the price to stay at N200, when the supply just dropped by 80%. Prices should double at the very least until a clearing price is found. But this is Nigeria, where we are so suspicious of market forces that we believe everyone is a monster who is out to suck the poor dry. Therefore, we have to create our own equilibrium.

Fake Equilibrium

I call this new equilibrium, the fake equilibrium. The Government says the price of petrol is N145, therefore, the price of petrol is N145, because the poor must not suffer.

Now, this chart is a little bit complex.

We can see that the supply shock is still there and there is a hard cap of 8 million liters of fuel available per day. We are now operating along the Supply Curve 2, but we are stuck to the price at Supply Curve 1. What’s going on here? Can you see the “???”? That’s the volume of petrol per day that Nigerians actually get to buy at N145. No way in hell is everybody paying that N145, not even the poor masses we are protecting.

Only very lucky people who drive in, just when a petrol station opens, people with serious connections, and the rich people actually get to pay N145. The rest of us pay more. Now, the excess that we are paying above N145 is not necessarily in Naira and Kobo, but the opportunity cost of spending endless hours on fuel queues. The time that we could have spent on more productive economic activities is wasted on fuel queues.

The time you could have spent to gather your thoughts and come up with crazy ideas to move the country forward, you spend it on the road, burning fuel you don’t have to look for a long fuel queue to attach yourself to. And the painful part is that a lot of people spend hours on fuel queues only to be told that fuel has finished, and then you buy black market, at a minimum of N250 per liter, if you are lucky, to continue for another fuel queue hunt. All these things are costing the economy a huge loss.

Now, not only the masses are suffering. Even NNPC is suffering. Instead of them to do useful things, they are now hunting down fuel stations, stretching already thin resources, and burning scarce petrol to execute their N145 per liter mandate.

I have heard a lot of excuses that Nigerians are monsters and that if fuel prices are deregulated, they will collude to raise petrol prices through the roof. While I concede that there is a possibility of that happening, the Department of Petroleum Resources (DPR) should look for ways to ensure that such collusion does not happen. That’s what we are paying them to do with our taxes. Have we ever wondered why telecommunication giants have not been able to collude to raise calling tariffs through the roof?

When fuel prices were raised from N86.50 to N145, I saw a couple of petrol stations with fuel queues while others were virtually empty and I wondered what was going on until I discovered that the ones that had queues were selling at N143. That told me something. Many Nigerians were ready to stay on some queue because of N140 max (that is N2.00 per liter for maximum of 70 liters). Likewise, many others felt, that have better things to do with their time.

Now, I am not saying that NNPC should scrap their N145 per liter. But if petrol stations want to sell at N300 per liter, let them be. As long as NNPC stations are selling at N145, those who want cheap fuel can go and buy the cheap fuel. Economics allow for discriminatory pricing — those who pay for economy class and those who pay for business class are still going to fly from Abuja and land in Lagos. The extra comfort the business class tickets provide is worth it for some, but for many, it is not worth it. Let everyone find their level.

So, when I hear argument that petrol stations selling petrol at N250 are doing economic sabotage, I disagree. The real economic sabotage is not allowing everyone who wants to import petrol, import petrol.

There is a standard pricing for imported refined petrol. The DPR/NNPC should look for ways of allowing people import the products freely, agree to an embedded profit margin that will adjust with market prices, and let us all flourish.

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Analysis: Total Nigeria needs a financial overhaul

 Total Nigeria’s Q1’20 results are a testament that some might have it worse than others as it recorded a revenue drop of 9.3% to N70.2 billion



Total Nigeria, Analysis: Total Nigeria needs a financial overhaul

The Oil Industry has had a particularly tough year, owing primarily to the novel pandemic. The International Energy Agency (IEA) predicts that the global oil demand is expected to further decline this year as Covid-19 spreads around the world, constraining travel as well as other economic activities.

Organizations like Total depending on international trade will be forced to scale down operations until restrictions ease off. However, Total Nigeria’s Q1’20 results are a testament that some might have it worse than others.

The period recorded a revenue drop of 9.3% to N70.2 billion in the first quarter of this year compared to Q1 2019. Total earns its revenue from three main sectors namely: Networks, General Trade, and Aviation. Revenue from Aviation fell by 39.5%. The decline in Networks is attributed to the reduced demand as a result of the enforced lockdown and restriction on travel across the nation.

READ ALSO: Analysis: MTN’s blow out Q1 profit vs Covid-19 headwinds  

Yet, it is clear that the company had its own challenges pre-COVID-19. In the quarter, it attained a loss after tax of N163 million which was 65.6% better than the loss after tax of the comparative quarter; it is overwhelmed by a myriad of distinct issues.

First off, its revenue has experienced a steady fall over the years; reasons for this is tied largely to its lack of importation of petroleum products.

It is also burdened by inefficiencies in its operations evident in its high operational and direct expenses, as well as its high debt over the past years. The company has carried on huge loans and borrowings in its books: N40.6 billion in 2019 and only a marginal reduction of N2.2 billion in the current year.

(READ MORE:Nigeria’s Bonga crude oil export terminal shut down)

Even higher are its expenses after an 8.38% reduction in the just-released results, it arrived at N69.7 billion for Q1 2020. Amongst its high operational expenses is the high and increasing technical fees it pays to its parent company. From N251 million in the first quarter of last year, it incurred around N700m in the year under review. It also has cash flow issues with about N22b in negative cash and cash equivalents. In its 2019 report, it revealed that the year had been tough with its cost of doing business rising exponentially as evident in its interest expense, 395% higher than the previous year as a result of repayment for products and a high level of borrowing.

Total Nigeria records loss for the first nine months of 2019, Analysis: Total Nigeria needs a financial overhaul


The company, in its last full year annual report, noted that to make significant savings to both operational and capital expenditure costs, a series of initiatives relating to cost efficiency, process optimization, and significant reduction of working capital requirement and finance costs, were put in place and are in motion for this year.

READ ALSO: STERLING BANK: Reduced fee income, weak operating efficiency drives steep decline in pre-tax profit

As Dr. Fatih Birol, IEA’s Executive Director put it “The coronavirus crisis is affecting a wide range of energy markets – including coal, gas, and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand transport fuels.”

However, Total’s position goes beyond the impact of the pandemic. Its rebound rests on its ability to carry on with cost control and lower debt commitments, together with the speed of the containment of the virus. That said, the company might need to raise capital soon while also coming up with formidable strategies to strengthen its business model.

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Merger, Tax incentive boosts BUA Cement FY 2019 result

BUA Cement Plc recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.



BUA Cement gives succour to host communities in Edo

One of the industries set to experience the downsides of the Covid-19 pandemic is the construction industry. Given the slowdown in construction activities as a result of the lockdowns and constrained economic activities, the reasons are not farfetched.

Prior to the outbreak of the pandemic, Globe Newswire had predicted an accelerated growth pace of the global construction industry from 2.6% in 2019 to 3.1% in 2020. This growth has now been revised to 0.5%. What is even more daunting is that the revised growth rate is based on the assumption that the outbreak will be contained across all major markets by the end of the second quarter of 2020.

It is only after that (including freedom of movement in H2 2020) that events could facilitate reverting to the normal course of activities to foster businesses in the industry like BUA Cement or those that depend on it to restart activities.

Nigeria’s third-largest cement company, BUA Cement Plc, however, still has its 2019 victories in order. Involved in the manufacturing and sales of cement, BUA Cement has 3 major subsidiaries and plants in Northern and Southern Nigeria.

(READ MORE:Update: BUA Cement Plc lists N1.18 trillion shares on NSE)

With a market capitalisation of N1.18 trillion ($3.3 billion), BUA is the third most capitalised company on the NSE. Its recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.

Kalambaina Cement Line 2, BUA Group, Kalambaina Cement, CCNN, Merger, Tax Incentive Boost BUA Cement FY 2019 Results

The company’s profits also increased by 69.1% from N39.17 billion in 2018 to N66.24 billion in 2019. Core operating performance was strong, and this was supported by strong cement sales in the domestic market, impairment writes back, and other income.

Deal book 300 x 250

The main reason for the company’s increased earnings is from the cost synergy and increased revenue as a result of the merger that took place between CCNN Plc and Obu Cement Company Limited.

There was also a striking jump in its income statement on its tax for the year. For FY 2019, it incurred a tax expense of N5.6 billion, in comparison to the N24.9 billion tax credit it received in FY 2018.


This was as a result of a reversal of previous tax provision made on Obu Line 1; it received approvals for an extension of the company’s pioneer status on Obu line-1 and Kalambaina line-2 in February 2020, to leave effective tax rate at just over 8% in 2019. The pioneer status will help the company save funds that will otherwise have been spent on higher taxes.

(READ MORE:Dangote Cement to access more debt funding)

BUA reported an impressive FY’19 result. Its performance shows the growing strength of the company and its increasing market share. On the back of the strong performance, management declared an N1.75 dividend per share that translates to a dividend yield of 5.5% on current prices.

Cash flow position was also robust with a strong closing cash balance – from N2.8 billion in 2018 to N15.6 billion as at year ended 2019. The company’s growth, as well as the impact of its merger, present a great buy opportunity of the highly capitalized, low-cost stock. As of today when the market closed (21st May) its share price stood at N35.60 from a 52-week range of N27.6 and N41.

READ ALSO: COVID-19: Best and worst case scenarios for the Nigerian economy

What we see is a great growth stock further heightened by the population expansion and increased urbanization. However, we expect the impact of the Covid-19 pandemic to be felt from the Q1 results of the company.


The industry could slow down for the year as the level of commercial construction also slows down. Yet the best part of holding stocks like this is that even with stalled operations for a period, a resurgence will always emerge.

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Analysis: Airtel Nigeria is winning where it matters

Airtel has left no stones unturned in ensuring that its provisions are top-shelf – subscribers to the network, of course will have their own ideas.  



Analysis: Airtel Nigeria is winning where it matters.

Airtel might have won our hearts over with internet-war adverts starring our favourite tribal in-laws, but its fundamentals are what will make us the bucks that keep us happy. Airtel Africa Ltd is a subsidiary of Indian telecoms group, Bharti Airtel Ltd; the group has left no stones unturned in ensuring that its provision of prepaid plans, credit transfers, mobile internet services, messaging, roaming facilities and more, are top-shelf – subscribers to the network, of course, will have their own ideas.

Since last year when Airtel Nigeria became the second telecommunication company in Nigeria listed on the NSE, the company has experienced a steady level of growth. With a presence in 14 African countries, the group’s strength lies in its diversity with stronger companies mitigating the poor performances of others.

Performance Overview: Airtel Africa 

Airtel Africa’s report for the year ended March 2020, revenue jumped by 10.9% from $3.1 billion at the year ended 2019 to $3.4 billion in 2020. The consolidated profit before tax also jumped by 71.8% from $348 million in 2019 to $598 million in 2020. However, profit for the period dropped by 4.23% with earnings of $408 million in 2020 from the $426 million it had earned in 2019. A reason for this is the tax figure that moved from a credit of $78 million in 2019 to tax payments as high as $190 million in 2020. Total assets also jumped by 2.41% from 2019’s value of $9.1 billion to $9.3 billion in 2020 primarily as a result of their acquisition of more property, plant, and equipment (PPE). The total customer base grew by 9.3% to 99.7 million for the year ended.

Full Report here.

Revenue growth of 10.9% was driven by double-digit growth in Nigeria and East Africa. However, the rest of its African operations experienced a decline in revenue. Its success in Nigeria is especially commendable, considering the fact that the company lost more than 100,000 subscribers in Nigeria between December 2019 and January 2020. Raghunath Mandava, Chief Executive Officer, remarked that the results which were in line with the group’s expectations, “are clear evidence of the effectiveness of our strategy across Voice, Data and Mobile Money.”

(READ MORE: NCDC and NNPC-IPPG reinforce #TakeResponsibility theme with multi-lingual campaign)

Behind The Numbers – Nigeria

Airtel Nigeria’s performance indicates the company is making the right calls in a very competitive industry. Nigerians are fickle when it comes to data and voice but will spend if the service is right. The company grew its data revenue by a whopping 58% to $435 million a sign that its strategy to focus on data is working. Voice Revenues for the year was up 15% to $850 million. In total, Airtel Nigeria’s revenue was up 24.4% to $1.37 billion. Ebitda margin, a number closely watched by foreign investors 54.2% from 49% a year earlier. Operating profit for the year ended also jumped by 52.6% for the year from 2019 and 32.4% from Q1 2019. Total customer base in Nigeria also grew by 12.5%.

Regulation forces Airtel Africa to initiate shares listing in Malawi , Analysis: Airtel Nigeria is winning where it matters.

Deal book 300 x 250

Nigeria is surely critical to Airtel Africa’s future seeing that it contributes about one-third of its revenue. Recent results thus indicate it is winning where it matters most and it must continue to stay this way if it desires to survive a brutal post-COVID-19 2020. Telcos are expected to be among the winners as Nigerians rely more on data to work remotely but there are other players in this game. Concerning the impact of the pandemic, he explained that at the time of the approval of the Group Financial Statements, the group has not experienced any material impact arising from the impact of COVID-19 on its business.

On cash flows…

The group has also taken measures to enhance its liquidity. The CEO explained that it is moving its focus to enhance liquidity towards meeting possible contingencies.


“Having considered business performance, free cash flows, liquidity expectation for the next 12 months together with its other existing drawn and undrawn facilities, the group cancelled the remaining USD 1.2 billion New Airtel Africa Facility. As part of this evaluation, the group has further considered committed facilities of USD 814 million as of date authorisation of financial statements, which should take care of the group’s cash flow requirement under both base and reasonable worst-case scenarios.”

To this end, they have put in the required strategies to preserve its cash as its cash and cash equivalents, consequently, jumped by 19.1%.

(READ MORE: COVID-19: MTN says it has put strict measures in place to preserve resources)

Buying opportunity

Investors looking at this impressive result will be wondering if this portends a buying opportunity. Airtel Nigeria closed at N298 on Friday and has remained at this price for about a month. The stock is quite illiquid and is not readily available to buy.

It’s the price to earnings ratio of 4.56x makes it quite attractive. Further highlighting this opportunity is its price-to-book ratio which is as low as 0.5273, suggesting that the stock could be undervalued. Whether it is available to be bought, is anyone’s guess.





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