At the backdrop of sharp rises in cost of procuring products and interest rates in banks petroleum marketers have recorded massive jump in bank borrowing and cost of doing business.

Financial Vanguard findings from the financial records of key operators in the sector show they borrowed over N3.0 trillion in the nine months ended September 2024, 9M’24, up by 76.5 % from N1.7 trillion in the corresponding period 2023, 9M’23.

The Central Bank of Nigeria, CBN, Monetary Policy Rate (MPR) which is the benchmark lending rate for banks, went up from 18.75% in 2023 to 27.50% in 2024, a rate considered too high and disincentive to businesses.

However, the sharp and sudden rises in petroleum product prices forced the oil marketing companies to resort to bank borrowings to meet up with product procurements.

Consequently, the companies recorded high growth in finance cost, rising to N156.9billion in 9M’24, representing 78.9% increase from N116.083 billion in 9M’23.

But the companies still recorded significant profit margins on the back of huge rise in turnover driven by higher pump prices of petrol across the country, indicating that they effectively transferred the high cost of borrowings to the consumers.

The combined firms’ profit before tax, PBT grew by 44.5% to N420.805 billion in 9M’24 from N280.805 billion in 9M’23, while turnover grew by 57.9% to N5.296 trillion from N3.355 trillion in 9M’23, surpassing inflation at 34.8%.

The companies covered by Financial Vanguard findings includes Oando, Conoil, Eterna Plc, MRS Oil,Total Energies and Aradel Plc.

Explaining the market situation, industry and financial analysts said the elasticity of demand for petroleum products is quite high hence they were able to transfer their costs to consumers.

https://www.vanguardngr.com/2025/02/subsidy-removal-oil-marketers-expand-borrowings-by-76-5-to-n3-0trn/