A Review of the Nigerian Energy Industry

Awaiting N40 per litre fuel

21 April 2015, Lagos – Tamunoemi Sokari David-West’s fame as Professor of Virology at the University tends to obscure his involvement in politics where his services as Commissioner for Education (Rivers State), Minister of Petroleum, and Minister of Mines, Power and Steel, all under military regimes, are well known.

IPMAN-fuel pumpHe is one of those tipped for cabinet membership in the in-coming government. It could be on the authority of these pedigrees that he affirmed that Maj-Gen Muhammadu Buhari would reduce the price of fuel to N40 per litre. He did not say what the price of kerosene, a product majority of Nigerian urban dwellers use, as cooking fuel, would be.

It is equally doubtful that he spoke on the authority of the President-elect, General Buhari. Did he speak, leaning on his understanding of the economics of oil and gas or as a counterpoise to government’s reduction of the price of fuel to N87 per litre, which some saw as a campaign gimmick?

Whatever informed the position, those who know that David-West, 78, was Buhari’s Minister of Petroleum, 31 years ago, may consider his proposed price of fuel to have some substance or was it David-West’s way of protecting his principal, in case the price of fuel became an election issue? How did he arrive at his figure?

Nigerians would be interested in any government policy that would reduce the incremental hardships that they have seen through various regimes. Fuel is so central to Nigerian life that they would support policies that would make it available and affordable.

They would also want to know how lower fuel prices would affect other sectors of the economy. Would the price go down because of subsidy? The major determinants of the price of fuel are cost of products and distribution. They have not been addressed and they do not seem like issues that could be resolved in months.

Adequate domestic refining capacity, for domestic consumption, would eliminate cost of importation, which high exchange rates exacerbate. Domestic refining would, also, create job. Distribution challenges are evident from burst pipelines to the celebrated chaos on the Apapa-Oshodi Expressway.

They have great impact on the price of fuel, in addition to indeterminate costs like charges marketers pay at the depots. These are obstacles to cheaper fuel and some interests have over the years elevated them to prominent features of the economics of the industry.

Sustainable solutions that include functioning refineries, new distribution logics with primacy for the rails would crash the price of petroleum products perhaps below David-West’s projection. Nigerians await solutions to national challenges that look beyond immediate applause, but we have to abridge expectation with hard work.


– Vanguard Newspaper Editorial

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