The return of fuel shortages across the country in December 2017, after two years of reprieve, has been a source of worry to stakeholders and Nigerians in general.
Despite repeated assurances from the Federal Government represented by the Nigerian National Petroleum Corporation (NNPC), that it was taking steps to address the shortfall in supply, the reality on ground suggests otherwise.
Indeed, Nigerians celebrated a bleak Christmas in 2017, which was characterised by energy crisis as most fuel stations across the country were out of stock.
The ugly development eventually snowballed into the New Year in 2018 but later got a bit better after the first week as there was intermittent supply of products to the fuel stations.
But by the third week of this month, the fuel queues were back again, subjecting Nigerians to untold hardship with many man-hours lost at the fuel stations while commercial vehicle operators have cashed in on the situation to hike transport fares.
The frequent shortages in fuel supply has been attributed to the decision of the NNPC to assume the role of a sole importer of petrol, a decision that stakeholders have faulted, saying government does not have any business to be in business.
On the other hand, government equally placed the blame at the doorstep of fuel marketers, saying they engage in all forms of unethical and unpatriotic practices to create scarcity, through hoarding and diversion of petroleum products, a claim the marketers equally refuted.
But oil and gas operators believe that unless government summons the courage to deregulate the downstream sector, free up the market, and allow private sector to take control of importation of petrol, fuel scarcity will continue to be a recurring decimal.
They argued that a situation where NNPC wants to operate as a monopoly or continue to fix prices of fuel, will do the sector more harm than good as investments will be locked down.
Experts believe that unless the refineries are rehabilitated and running at 100 per cent installed capacity, the country will continue to run in endless circle of fuel shortages.
Nigeria has three refineries – Port Harcourt Refinery: 210,00bpd; Warri: 125,000bpd and Kaduna: 110,000bpd. This brings the total installed capacity of the three refineries to 445,000 barrels of crude oil per day. Even at optimal capacity, the refineries cannot meet the 55 million litres daily consumption demand of the country but will go a long way in bridging the demand gap.
The domestic crude oil supply of 445,000bpd can only guarantee less than 30 per cent of the 55 million litres’ national requirement for petrol. But due to poor maintenance, vandalism and corruption in the running of the refineries, the capacity of the refineries to run optimally began to nosedive until they attained zero production capacity, forcing NNPC to assume the role of a sole importer of petrol.
The last time a comprehensive Turn Around Maintenance (TAM) was conducted on the three refineries was in 1992.
Why there is shortfall in fuel supply
A major reason why the country will continue to experience shortfall in product supply is the distortion in the fuel import ratio.
Historically, Depot and Petroleum Products Marketers Association (DAPPMA) members import about 65 per cent of the nation’s total fuel consumption; Major Oil Marketers Association of Nigeria (MOMAN), 15 per cent and PPMC/NNPC import the balance of 20 per cent.
But since October 2017, NNPC has been the sole importer of petrol into the country, a development that led to the energy crisis last December till date. ‘‘Sadly, some people have blamed marketers for hoarding products. Unfortunately, this is so far from the truth. Hoarding is regarded as economic sabotage and we assure all Nigerians that our members are not involved in such illicit acts,’’ said DAPPMA Executive Secretary, Mr. Olufemi Adewole.
As it stands today, NNPC has been the sole importer of PMS into the country since October 2017 due to the following reasons:
‘‘We all know that we presently run a fixed price regime of N145 per litre for petrol without any recourse to subsidy claims. However, we also have no control on the international price of crude oil.
“Current import price of petrol is about N170/ltr. NNPC, which absorbs the attendant subsidy on behalf of the Federal Government, is the importer of last resort,’’ he explained.
Adewole disclosed that NNPC meets fuel demand largely through its Direct Sale Direct Purchase (DSDP) crude for product framework, stating that due to price challenges on the DSDP platform, some participants in the scheme failed to meet their supply quota of refined petroleum products, especially petrol, to NNPC, which is now the main reason for this scarcity.
On the other hand, he said the international price of petrol went up during the hurricane Katrina and has not dropped below $600/metric tonnes (MT) while exchange rate of dollar to the naira is N306 for petrol imports, banks’ interest rate charge is above 25 per cent.
The DAPPMA boss maintained that based on the scenario above, landing cost of petrol in Nigeria is currently above N145/litre, which means any of its members that imports would have to resort to subsidy claims, a policy already jettisoned by the Federal Government.
Porous land borders
The porous state of the nation’s land borders also contribute to fuel scarcity as fuel meant to be consumed in-country finds its way to neighbouring countries including, Republic of Benin, Togo, Mali and Senegal where it is sold at exorbitant price.
Last week Wednesday, the Group Managing Director of NNPC, Mr. Maikanti Baru, raised the alarm over the sustained nefarious activities of some cross-border fuel smuggling syndicates and hoarders, which have so far impeded efforts by the corporation to sanitise the fuel supply and distribution matrix across the country.
The alarm raised by Baru may not be unconnected with the arrest by men of the Niger State Command of the Nigeria Security and Civil Defence Corps (NSCDC) of eight trucks laden with a total of 469,000 litres of petrol and their drivers in Mokwa, Niger State, on their way to Babana, a border town between Nigeria and Republic of Benin.
Baru had told the Joint National Assembly Committee on Petroleum Downstream that if the activities of the fuel truck diverters and smugglers were left unchecked, it would be absolutely difficult to guarantee round-the-clock availability of petrol throughout the country due to the massive leakages wrought on the fuel supply and distribution network by the smugglers.
In a detailed presentation to the Joint Committee, the NNPC boss informed that the sudden and unnatural shock in fuel consumption to record levels has over-stretched the DSDP crude for product supply arrangement, which was originally based on 35 million per day petrol consumption pattern.
He lamented that with the current unprecedented average daily fuel evacuation of 55 million litres since December 1, 2017 to date, it was imperative for security agencies to close-in on the smuggling syndicates who were cashing in on the obvious petrol price differentials between Nigeria and neighbouring countries to make illicit profit.
What should be done?
Former Managing Director of Kaduna and Port Harcourt refineries, Mr. Anthony Ogedengbe, is one of the experts who believes that the scarcity might not be stopped totally with the ongoing measures. Ogedengbe had in a recent interview insisted that the queues will keep reoccurring if the government does not put real measures in place to permanently stop the scarcity.
For his part, Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yussuf, advocated urgent need for the Federal Government to liberalise the nation’s downstream petroleum sector and create a robust private sector space for private investors to do business.
He said the development is the best measure to free the nation from the current excruciating fuel scarcity in the last few weeks.
He frowned at the monopolistic right accorded the NNPC to import fuel, saying the model is fraught with inefficiency, transparency issues, perpetuation of culture of patronage and imposes a huge burden on the treasury of government.
He reasoned that a fundamental policy review is imperative and urgently needed to correct the anomaly.