23 November 2015, Lagos – Nigeria, Africa’s largest oil producer, exports nearly two million barrels per day of crude oil, but relies almost entirely on imports for the 48 million litres per day of Premium Motor Spirit (PMS) it consumes.
Some of those imports come via a programme to swap crude for refined petroleum products, which are the subject of a government corruption investigation before it was totally cancelled by the present Minister of State for Petroleum Resources, Dr Ibe Kachikwu.
Fuel has become a very scarce commodity in the last one month due to the delay in the release of subsidy arrears to marketers of petroleum products.
Despite assurance by the Federal Government to pay the N413 billion subsidy debts to petroleum markers in the country, queues again returned to filling stations in the last week, triggering an increase in transportation and general cost of living. Though President Muhammadu Buhari has asked the National Assembly to approve the payment of N413 billion claims by oil marketers, The Guardian gathered that the marketers are determined to continue to hoard fuel until the debt is fully paid.
As at yesterday, petrol was being sold for between N120 and N400 per litre in various parts of the country. Queues are long at filling stations where there is fuel. Many others are shut for lack of supplies.
When The Guardian visited Total filling station along Ojuelegba road, the gates were locked while black marketers had a busy day in their illicit business. Oando and MRS along the same road were not also selling.
Sabola, Rain Oil and Petroleum Manager along Okota and Oshodi Apapa expressway were seen selling fuel with only one dispensing machine, thereby creating a long queue along the major roads.
Most fuel stations on LASU-Isheri expressway were shut while long queues were seen at the few that were functional.
Fuel is now being sold in the black market with five litres costing between N2,000 and N2,500. At some fuel stations, petrol sold for N200 and N150 respectively. With long queues at the few petrol stations that were open, desperate consumers were ready to buy fuel at any amount.
Some marketers who spoke with the Guardian expressed displeasure over government’s inability to pay the long over due subsidy debt, therefore, their resolve to stop loading fuel at the depots.
A marketer, who spoke with The Guardian yesterday, alleged that no marketer has been able to get the money through the Central Bank of Nigeria.
The latest development has brought untold hardship to consumers who have to pay high so much to transportation and commodities.
Reacting to the issue, a foodstuff dealer at Cele market, Mrs Chidima Kalu, stated that traders had to increase the prices of their commodities because they now buy at a higher cost from those they purchase their goods from.
According to her, a rubber of melon otherwise known as egwusi, they used to buy for N300, now sells for N500, and that they will also push both the cost of transportation and the added cost of goods to the final consumers, so as to sustain their business.
On his part, garri dealer in Ikotu Market, Mrs. Celina Adebola, said the increase in transportation cost is what has affected the prices of commodities.
According to her, transport operators have taken advantage of the fuel scarcity to increase fare, and that from where they transport garri bags from the bush market that they had to pay extra cost in transport.
She said that big rubber of garri, which sold for N500 and N650 now sells for N700 and above due to increased transport fare.
She, however, regretted that people and indeed the masses are suffering some of these things due to mere negligence from those in authority, stressing that the reason for the fuel scarcity is not very convincing.
“This is really ridiculous. How can we enjoy the weekend without electricity and petrol? I cannot enjoy the day with my family because there is no power. The federal government should settle with the oil marketers before things go out of hand,” a consumer, told The Guardian.
Another aggrieved buyer blamed the scarcity on the federal government, alleging that, it was a calculated attempt to frustrate the incoming government. “The federal government is doing this on purpose.
They should have paid the oil marketers before now. They left our refineries in tatters and we are left at the mercy of these so-called marketers.”
Hoarding continues despite NNPC’s special supply
Despite the regular supply of Premium Motor Spirit (PMS) by the Nigerian National Petroleum Corporation (NNPC) to filling stations across the country, consumers have continued to face a hard time in getting the essential commodity. The Guardian investigation showed that many of the filling stations, which the NNPC claimed to have supplied fuel, were either not selling at all or selling with one dispensing pump thereby creating a long queue of vehicles waiting for the product.
For instance, Total filling stations at Alapere and Lekki phase two, which were supplied over 33,000 litres of fuel each, had long queues of vehicles yesterday, because of the use of one pump by the station.
Also, NIPCO at Lagos State University road, Iba, which was not selling at all prior to the announcement by the Group Managing Director of NNPC Kachikwu, instructs the Department of Petroleum Resources (DPR) to carry out enforcement against any filling station hoarding the product. SONEG, BOVAG, Ibukun Olu, So Energy and many others were as at yesterday not selling the product despite abundant supply by the NNPC.
The NNPC in its daily update of supply of petroleum products claimed to supply PMS to Mobil, Conoil, MRS, Oando Forte, NIPCO, So Energy, Bovag, Ibukun Olu and so many others in different part of Lagos and across the country.
Though, PMS is supposed to be sold at N87 per litre, the National Bureau of Statistics, in its October PMS price control watch, said that the product is still be sold at above N100 in many states in the country.
According to the agency, a litre of fuel in Bayelsa State N111; Abuja, N108.20; Cross River, N105.80; Kebbi, N100.24, Nassarawa, N102.50 and Taraba, N194.57.
The report showed that PMS was skid at the official pump price of N87 in Delta, Bauchi, Akwa Ibom, Kasina and Ondo states respectively. NBS put the average pump price of fuel across the country in October at N93.48 per litre.
The report has indicated that average fuel price had remained significantly above the official price so far this year, with the lowest price at N93/litre in February, while the average peak price of N118.36/ litre was recorded in May, at the twilight of the administration of former President, Dr Goodluck Jonathan. The national average had been in decline since June.
Cost of fuel subsidy in Nigeria
Subsidies were introduced in the Nigerian energy sector in the mid-1980s. Something of a creeping phenomenon, the value of the subsidies has gone from $1 billion in the 1980s to a prohibitive $6 billion. Available data show that the Federal Government spends about N1.4 trillion, about 30 per cent of its total yearly expenditure yearly on fuel subsidy.
Specifically, the government spent a whopping N4.5 trillion on fuel subsidy claims between 2006 and 2012, according to the audit reports of the Nigerian Extractive Industries Transparency Initiative (NEITI).
A breakdown of the payments shows that while N816.5 billion was paid as subsidy claims between 2006 and 2008, the amount skyrocketed to N3 trillion between 2009 and 2011.
In 2012, the sum of N888 billion was allocated to subsidise petroleum product imports in the budget, but in December a supplementary budget of N161.6 billion for payment of arrears of fuel subsidy was submitted by the president and later approved by the National Assembly.
For 2014, the Federal Government again budgeted N971.1 billion for payments of subsidy, keeping it at the same level with that of 2013.
Stakeholders want fuel subsidy removal
Stakeholders in the oil and gas industry believed that Nigeria’s fuel subsidy is unsustainable.
The Minister of State for Petroleum Resources, Kachikwu said recently that subsidy creates distortions in government revenue distribution.
According to him, Nigeria spent 20 per cent of its budget in 2013 on subsidies for imported fuel, heating oil and other refined products. Costs totalled N5 trillion from 2006 to 2012, he said.
The “government is not in control of factors that influence the retail fuel price, particularly fluctuations of the crude oil price at the international market,” he said.
Kachikwu who called for the deregulation of the downstream sector said that it will provide a fair deal for Nigerians from the abundant petroleum resources, through fair product prices for consumers, full cost recovery, and reasonable margins for operators.
“Implementation of the policy will entrench efficiency in product usage, product availability and effective competition among investors, hence ending products shortage.
“However, critical enablers such as security of supply and distribution infrastructure must be assured to guarantee the availability of the petroleum products at affordable prices,” he said.
President of Lagos Chamber of Commerce and Industry (LCCI), Alhaji Remi Bello, noted that the Chamber appreciated the enormity and dimensions of the potential short-term impacts of subsidy removal on the economy and the citizens.
Bello said a review of the subsidy regime would result in increased private investment in the downstream oil sector with a corresponding impact on the creation of quality jobs, reduction in the pressures on foreign reserves, a huge chunk of which is currently being used to fund fuel importation, and better fiscal space to ensure macroeconomic stability with a resultant positive effect on the economy.
Renowned Economist, Henry Boyo, in his analysis of the fuel subsidy regime, posited that the fuel can sell at cheaper prices in the country on the basis of an appreciable exchange rate as it has a significant correlation with the price of crude oil.
Boyo noted that Naira’s weak exchange rate to the Dollar is a major bane on subsidy regime, which has been complicated by the negative impact of Nigeria’s faulty monetary framework on the revitalization of the real sector.
“Banks attempts to increase credit capacity in the economy resulting to excess liquidity putting too much cash in the economy, more cash more problems has over the years resulted into weaker Naira, lower purchasing power and inefficient borrowing system both in terms of international debt funding and domestic borrowing.
He noted that the subsidy could be allowed to disappear naturally if relatively more dollars are made to chase existing Naira in Nigerian banks and dollar certificates are issued to the three tires of government and MDAs.
Boyo advocated that innovative approaches have to be taken to reduce the burden of subsidy until it will naturally disappear from Nigeria’s economic system.
“With inflation at almost 10 per cent and cost of funds at over 22 percent to the real sector and a weaker Naira, clearly the CBN’s liquidity forecasting and programming have failed as a monetary strategy to induce price stability”, Boyo argued.
Managing Director, Economic Associate Dr Ayo Teriba’s stated:
“I am still concerned that 22 years down memory lane we are still here arguing about removal or retention of fuel subsidy. Such discussion is a waste of time a when solutions can actually be preferred”.
He added that for the inherent problems of fuel subsidy to be solved, fuel has to be refined locally for both export and domestic use. He further argued that government needed to encourage capital inflow as it determines value of exchange rate.
“Our naira can only be strong if the capital inflow is retained”, he maintained.
Govt, marketers’ efforts to end fuel scarcity
At a meeting convened by Minister of State for Petroleum Resources, Kachikwu, the federal government reached an agreement with petroleum product marketers to support measures put in place by the NNPC to end the scarcity of petrol currently plaguing the country.
A statement from the NNPC noted that the leadership of the Major Oil Marketers Association of Nigeria (MOMAN); Depot and Petroleum Products Marketers Association (DAPPMA), and Jetty and Petroleum Tank Farm Owners of Nigeria pledged to end the fuel queues as soon as possible.
While pledging to eliminate all bottlenecks to fast track the process, Kachikwu, urged the marketers to see the initiative as a national call to action. at the meeting and charged the marketers to activate all necessary machinery and mechanism that would guarantee unimpeded distribution of petroleum products across the country. He said “We have got the DPR, PEF and PPPRA to be a bit more flexible with the rules to allow for more movement of trucks and products massively,”
Secretary-General, MOMAN, Femi Olawore, stated, “For us, there is only one thing that we know how to do, and that is to sell petroleum products in accordance with the law. For us it is just a matter of a few days before we get to normalcy”.
According to the statement, Olawore noted that MOMAN would never do anything against the prevailing regulations on the supply and distribution of petroleum products. Eh also noted that the major marketers were willing and ready to work with the petroleum ministry and the NNPC to restore normal fuel supply.
The leader of the DAPPMA delegation, Dapo Abiodun, also pledged the commitment of his members to work towards the achievement of the Federal Government’s objective of ensuring free flow of petroleum products across the country.
- The Guardian