Fuel crisis: Oil marketers tighten grip on Nigeria

*Fuel queues dot the landscape.

*Fuel queues dot the landscape.

Oscarline Onwuemenyi

04 December 2015, Sweetcrude, Abuja – Over the past one month, Nigeria has, yet again, been gripped in the throes of a debilitating and depressing fuel shortage, which has led to widespread panic in cities across the country.

Like Christmas bells, accusations of incompetence and “Baba Go Slow” – an epithet that indicates that the President is way in over his head on the issues – ring out across the land. And the Senate committee probing the angst last week ordered President Muhammadu Buhari, the substantive Minister of Petroleum Resources, to bring an end to the crisis in two weeks time.

As queues for petrol by motorists at service stations grow longer and more citizens groan under the difficulties of buying petroleum products across major cities, the Nigerian National Petroleum Corporation, NNPC, insists that there is no need for panic, that it has more than enough products to satisfy hungry consumers. But panic and desperation and anger reigns through the land. Despite the assurances by the Corporation, the problem persists, and, so far, remains intractable.

NNPC insisted that the country has enough petrol stocks to last for about 35 days going by her average 40 million litres per day consumption rate. It stresses that that the prevailing fuel queues in some major cities across the country have nothing to do with the lack of supply of petroleum products.

To the Corporation’s credit, it consistently trots out daily report of petroleum products supplied to depots across the country. But motorists complain that those products never reach their intended destinations, and even when they do, are hoarded and sold to black marketers who in turn fleece the hapless consumers.

“The Country should be Buoyant”
Speaking to Sweetcrude Reports last week on the status of measures the corporation had initiated to improve on petrol supply and distribution across the country, the Director of Commercial Services of the Pipeline and Products Marketing Company (PPMC), Justine Ezeala said there is enough petrol stock to ensure that petrol supply is buoyant across the country. PPMC is the downstream subsidiary of NNPC.

He stated that a projected volume of 1.4 billion litres of petrol is available for distribution to fuel stations across the country all through the month of December.

Ezeala informed that as part of the extra measures in place to tackle the artificially induced queues, PPMC has increased the volume of petrol being trucked out to fuel stations across the country, adding that most of the 37 NNPC Retail Mega Stations across the country have been directed to commence 24-hour services.

“NNPC Retail has 513 retail outlets all over the country and the strategy is that every one of these stations is designed to have products at all times. In addition we have decided that most of the mega stations will adopt 24 hours operation model and where for security reasons that cannot be met, we are going to have extended hours of operation in such location starting from 5am and end till about 10.pm daily,” he said.

He maintained that there was no need for the sudden emergence of queues at filling stations.
Ezeala however noted that the country still has challenges in prompt delivery of petrol to all parts because its length of pipeline which would ordinarily take fuel from its storage facilities in Lagos to depots across the country were dysfunctional.

Analysts believe the problem of perennial fuel scarcity in a crude exporting country such as Nigeria will remain intractable unless basic issues mitigating the supply structure and the free market economy are addressed. Thus, they contend, finding a solution goes beyond assurances by the NNPC to addressing jinks in the petroleum law, and the system of production and distribution of petroleum products to the growing masses of consumers who need it to get by.

Mr. Folorunso Oginni, a former Lagos Zonal Chairman, Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), speaking in an interview, blamed the Federal government and its agencies for the worsening fuel situation, adding that “government has refused to do the needful, that is why we are experiencing recurring scarcity of petroleum products in the country.”

He said, “Go to Saudi Arabia now and you will realise that they are selling petrol at equivalent of N22 per litre, but in Nigeria we buy at N87 and above per litre. Saudi Arabia is able to sell petrol at N22 per litre because it is an oil producing country and they refine their crude oil within their country. They do not take their crude oil outside their shores to refine and import it back as refined products to sell at exorbitant rates to their citizens. Why is our government not doing the same to find a lasting solution to the problem of fuel scarcity in the country?

“The NNPC said they have pumped about 25million litres of fuel into the system, how come scarcity of fuel is even biting harder?

“If that is the case, where is the petrol? Why is the scarcity worsening by the day? These and many more, are the questions Nigerians are asking and government is not being sincere with us. Government should stop dribbling Nigerians and do the right thing,” he said.

Oginni remarked that crude oil prices are declining at the international market, yet Nigerians are buying fuel at a very high price, adding that the government is not being honest with Nigerians about the true position of things.

“This is what is so painful for Nigerians to bear. Government must rise to it responsibility, to tackle the problem of fuel scarcity. As long as government continues to import refined petroleum products, we are bound to experience scarcity of fuel.”

More Refineries Needed

He explained that at present, Nigeria has a population of over I60 million and the quantity of fuel we consume on daily basis is about 38.4million litres. “If our four refineries are producing at full installed capacity, they will produce about 18.2million litres of petrol. This implies that even when the plants are producing at optimum capacity, we will still need more products. So, until we stop importation and build more and new plants, we may not make any appreciable improvement.”

According to him, “All the four refineries we have now, non is producing at 60 percent installed capacity, yet instead of building new plants government keeps dribbling us, saying that the plants are working. Now, if the plants are working, why are we experiencing persistent scarcity of petrol?

“These plants were built since 1979 and they are obsolete. Government should stop importation of products and build new refineries across the country. For instance, let government build at least one plant in each zone in the country. If you do the analysis on the difference between 38.4million litres and 18.2million installed capacity of our refineries, you will see the wide gap, meaning we need new and active refineries to meet our daily consumption need.

“We have advised government several times and at different occasions, to stop importation of refined products and build new refineries across the country, but they are not yielding. Look at the sad situation we are in now. We even appealed to government to build new refineries, at least one plant each across the six geo-political zones in the country, but they refused, saying Nigerians are not managing government enterprises well.

“So, we further advised government to build the plants and give them out to third parties who can manage them profitably. In doing so, government can have agreement with them on how much they will remit to government every year, and within a short period, government will recoup its investment. After which, more revenue will still come in as profits from the refineries.”

According to Oginni, “Our government takes delight in importation of fuel and payment of subsidy. Let the media investigate the reasons behind huge subsidy allocations and issuance of licences for importation of products into the country. It is glaring that if you close subsidy and importation, it simply means you are closing the sources of their income. So, you can see the situation we are in this country. The sad thing is that the import licences are issued to their friends and cronies, who are making a lot of money for themselves, to the detriment of the entire masses of Nigeria.

“Importation and subsidy allocations have become veritable sources of income for some individuals, while the large percentage of Nigerians suffer in abject poverty and unemployment.

“That is why government is not interested in building new refineries to stop importation, and our economy is going backward, instead of moving forward like advanced countries. The reality is that, if you fail to plan, it means, you are already planning to fail. This is our situation in Nigeria today and we can see it playing out not only in oil and gas, but in almost every sector of the economy.

“Does it make any economic sense for Nigeria, which is one of the largest crude oil producing countries to import refined petroleum products? We have what it takes to build refineries in Nigeria, but those in authority are not interested due to selfish reasons. That is why we are experiencing recurring scarcity of fuel in the country.”

He noted that Singapore, for instance, has no crude oil, but that country has over 30 refineries. He adds, “They buy crude oil from outside, refine and sell to develop their economy. The problems in Nigeria are not diversion of product and hoarding as government is making Nigerians to believe, but corruption associated with issuing import licences and subsidy. They are putting lies on Nigerians, so that government will put everything at the door step of few individuals to enrich themselves.
You can only hoard a product that is scarce.”

He noted that government can build a modern refinery with $4billion. “What obtains all over the world now is modern automated refinery and not analogue. If the production capacity can meet our consumption need, why do we deceive ourselves with importation of fuel.

“When Niger Republic built a refinery and their President was asked what their plans were, since they may not consume everything that will come out of the plant, he said, they will sell to neighbouring countries, including Nigeria.

“Can you imagine how our situation has deteriorated so much that, a country like Niger Republic is targeting Nigeria for fuel export? Does what is happening now not speak volumes about the negligence of our government? Look at the power crisis in
Nigeria, other countries are generating power with hydro-carbon but in Nigeria, everyone is interested in oil when other resources are neglected.”

The Subsidy Conundrum

At the heart of the ongoing fuel shortage is the demand by oil marketers for the payment of over N413 billion, they claim is being owed by the Federal Government as subsidy.

This is even as an ongoing Senate probe into the subsidy regime has revealed that a fresh N108 billion covering three months fuel subsidy claims to oil marketers was not contained in the 2015 supplementary budget presented to the National Assembly by the Buhari administration.

Buhari had in the supplementary budget, requested for approval of N413billion for payment of subsidy from January to September 2015. With the new disclosures, oil marketers are now being owed N521 billion in outstanding subsidy claims.

The Senate Committee on Appropriation chaired by Sen. Danjuma Goje has therefore directed the Ministry of Petroleum Resources, the Nigerian National Petroleum Corporation (NNPC) and other relevant stakeholders to harmonise all budget claims to include payment for October to December 2015.

The Senate also asked the NNPC to breakdown the details of the amounts being paid to each of the independent marketers rather than the blanket sum that was submitted. It queried why the supplementary did not include the last quarter of 2015 stressing that the country could not risk another scarcity of petroleum products due to non-payment for the months.

The committee while expressing displeasure at the seeming lack of synergy between the relevant stakeholders, directed them to go back and harmonise their figures and submit later.

The Senate therefore directed the ministry to provide details of issues relating to subsidy payment from the last quarter of 2014 till date. “This government is about change; change from sordid past; change is to totally eliminate queues from our filling stations; every person must play a role to effect positive changes in the economy.

“We need the audit details for the purpose of oversight. Nothing stops us from going back to the issues even after the approval of the supplementary budget. We need to know the beneficiaries of the subsidy, and how they came about it,” he said.

In her remarks, Permanent Secretary, Ministry of Petroleum Resources, Mrs. Jamila Soara clarified that the major oil marketers imported 52 per cent of Premium Motor Spirit (PMS) while the Pipelines and Product Marketing Company (PPMC), a subsidiary of the NNPC was importing 48 per cent.

Given a breakdown of the proposed N413 billion, she said that N120.552 billion was amounts outstanding from 2014 and N292.8 billion for subsidy from January to September 2015. “We just called the attention of the budget office to the fact that the proposal for the last quarter had not really been captured because it was about N108 billion,” she said.

The Senate has already approved the supplemental budget together with the subsidy funds, and oil marketers would obviously begin to receive their payments in the days ahead.
Principalities & powers at NNPC
It is noteworthy that the present administration has quibbled with the idea of putting an end to the subsidy on oil and gas products in the wake of the wanton corruption and mismanagement that have attended the process in the past. In fact, President Buhari during his election campaign a few months ago made the reorganisation of the NNPC and ridding the industry of corruption, by removing the abused subsidy system, a major position of his remarkable rise to the Presidency.
But, six months down the line, the signals coming out of Aso Rock is that, much like his predecessors, the president may be finding out that he may have promised more than he can deliver. The war, indeed, may be against principalities and powers even beyond his control.
The president may have moved some pawns at the NNPC, changed guards and redeployed others, but the battle to remove subsidy in the importation of petroleum products in the country may have been postponed till another day, or maybe, another administration.
Indeed, the principalities and powers at the NNPC are mere euphemism for the endemic corruption at the state-run oil firm. Sources at the corporation say the fuel scarcity across Nigeria is due mainly to entrenched corruption within the company.
SweetcrudeReports was told that the main corruption is wrapped around the swap programme, the same arrangement under which some individuals and companies fleeced Nigeria under the Goodluck Jonathan administration. Under that arrangement, the NNPC takes crude oil meant for local consumption (445,000 barrels per day) outside Nigeria for refining and returns them as petroleum products.
Due to the glaring corruption thrown up by that arrangement, the new Buhari administration  initially abrogated the scheme, but was later to reverse itself on the matter. The idea, Minister of State for Petroleum Resources and Group Managing Director of the NNPC, Dr Ibe Kachikwu, had explained, was that the arrangement would run till the end of this year, to be replaced by direct crude oil sale and direct petroleum products purchase arrangement in the New York.
What is worrisome to observers is that though only a part of the 445,000 barrels per day was sent out and returned as finished products during the Jonathan regime, the entire volume is now being sent out for refining, yet the products are available at the fuel stations.
“This is what the president should investigation,” an NNPC insider volunteered.
Marketers holding Nigerians hostage 
The Nigeria Labour Congress, the umbrella body for Nigerian workers, on its part, is accusing oil marketers and some groups of holding the country hostage over the years.
The NLC President, Ayuba Wabba in a statement said it was unacceptable that Nigerians are forced to go through perennial fuel shortage and the associated hardships especially towards the end of every year.
“It is unacceptable to us that Nigerians are being forced to cough out between N150 – N300 per litre for fuel instead of the official price of N87 per litre. This to us shows a clear determination by some unpatriotic operators in the petroleum industry to circumvent government regulation through blackmail and other unorthodox methods,” he stated.
But the labour organisation’s hypocrisy is revealed in the very next paragraph where it is “commending President Buhari for opposing removal of subsidy. The NLC leader believed the ongoing fuel scarcity was a deliberate strategy by the cabal in the oil industry to force the hands of government to remove subsidy and thereby work against the interest of the masses.”
Comrade Wabba, much like his predecessors in the labour movement, along with their co-conspirators in the Trade Union Congress, have consistently kicked against the removal of subsidy, claiming that it will spell more doom for the welfare of Nigerians.
Yet, they will be among the first to lament the reckless corruption and megalomania associated with the subsidy system in the oil and gas industry.
Wabba’s NLC has argued that subvention or subsidy is a major function of the government which avails it the ability to be able to carry out its core functions of provision of welfare facilities to the citizens.
He further maintained that subsidy in any economic system cannot be ignored but in Nigeria’s context subsidy has been used to do a lot of havoc to the economy. “Therefore, the quagmire will continue even if you allow the system to be controlled by marketers,” he insists.
He analysed that placing subsidy side by side with deregulation which means allowing market forces to determine the price emphasizes the need for the government to continue to subject itself hook, line and sinker to economic policies of the multinational agencies who will always advance their selfish interests. “They will always give reason Nigeria should continue to import; they will always give reasons we need to deregulate so that they can have more money,” he argued.
He added, ”Oil is very strategic, even to our national security. Marketers will one day come together and say that they will sell petrol at N200 per litre, and what will you do. Like the case of kerosene and diesel, DPK has been full deregulated but you go to some places they sell at N200 per liter. Why should this be so? Why should citizens continue to carry the burden? What is the essence of government? It is welfare and well-being of the people and therefore why should it be so in our system?”
It will be recalled that the annual cost of subsidy rose to a peak of N2.2trn in 2011 before the last attempt to remove the subsidies. But there are indications that subsidy may drop from the N2.4 billion it recorded in last June to N1.07 billion recorded early this month following a disclosure by the Petroleum Products Pricing Regulatory Agency (PPPRA) in its pricing template which showed the expected open market price of the petrol at N109.42.
The official PPPRA template shows that the cost of imported petrol is at N115.54 per litre as at early September. this, according to the template constituted the product plus freight at N88.70, other charges at landing of N11.35 and distributors’ margins of N15.49. with the retail price still set at N87/l.
All these implied a subsidy per litre of N28.54 and a fiscal cost of N312bn per year. Only time will tell on which way the current administration will thread on this lingering fuel subsidy controversy as regards the various probable solutions that have been laid on the table by experts and stakeholders.
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