Despite being Africa’s largest oil producer, Nigeria imports petroleum products. According to the Nigerian National Petroleum Corporation (NNPC), the country spent N2.068 trillion on fuel importation between January and September 2017. Corruption, importation hiccups and infrastructure challenges, among others, have combined to cause products shortage. Energy Correspondent AKINOLA AJIBADE examines the intricacies of fuel supply.
The problem has defied solution. Despite widely reported efforts by the authorities, industry operators and stakeholders to find lasting solution to the lingering crisis in the downstream sector of the nation’s oil and gas industry, where protracted fuel scarcity has continued to unleash untold hardship on Nigerians, it has refused to abate. Rather than do so, fuel scarcity has emerged, arguably, as Africa’s largest oil producer’s worst nightmare.
Since December last year when the latest round of fuel scarcity hit the country, robbing Nigerians of a blissful, hitch free yuletide, the situation has yet to improve, months after. Checks by The Nation revealed that the product is still largely unavailable in some parts of the country. Fuel queues have yet to disappear completely from some service stations across the country, particularly where the product is being sold at the regulated price of N145 per litre.
Findings by The Nation showed that petrol, also known as Premium Motor Spirit (PMS), is still being sold at between N165 to N180 per litre in some parts of Lagos, Nigeria’s commercial capital. In the southeast, particularly Owerri, the Imo State capital, the products is being sold for as much as between N200 per litre in some filling stations, a development, which lent credence to the fact that the product is still unavailable, at least, in sufficient quantity.
Curiously, the scarcity of the product and its attendant high cost have persisted despite widely reported interventions by the Nigerian National Petroleum Corporation (NNPC). Its Group General Manager, Public Affairs, Udu Ughamadu, has never stopped telling angry Nigerians that it has been supplying more fuel with a view to reducing the burden the situation has foisted on consumers across the country.
For instance, he said the country imported fuel worth $4.6 billion in December last year in order to ensure that enough fuel was distributed in the country. According to him, the December intervention helped the government to ascertain the level of fuel needed in the country during emergency period.
Ughamadu said the country consumes between 39 to 40 million litres of fuel per day and loses N774million daily to activities who smuggle petroleum prodcuts to neighnouring countries, in order to make more money. Although, he stressed that the government has ensured that the supply go round the country in order to prevent scarcity, the expected succour has, however, refused to come the way of Nigerians as the problem has persisted.
The attendant anger and frustration may have forced the NNPC to dish out several reasons the Africa’s largest oil producer has remained yoked by protracted fuel scarcity. It listed some of the factors responsible for the problem as rising cost of importation, diversion and delay in clearing fuel cargoes at the ports, among others.
According to Ughamadu, NNPC remains the sole importer of fuel into the country, a situation, which he said was a heavy burden on NNPC’s shrinking purse. He said, for instance, that NNPC imports fuel at N181 per litre and sells the product at N145 per litre. “At N181 per litre of fuel, the Corporation is paying subsidies on fuel that it is importing into the country,” he complained.
“It is not convenient for NNPC to import fuel at N181. You can see that the difference between the landing cost of N181 per litre and the official pump price of N145 per litter is N36.
“If the Corporation, which is owned by the government is not comfortable with the rising cost of importation of fuel, how much more the private operators, especially marketers that are complaining of not having enough funds to import fuel into the country?”he asked.
The Nation, however, learnt that the problem goes beyond cost of importation. According to the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, dearth of infrastructure is at the core of the problem. To him, the lingering fuel scarcity was caused by lack of sufficient fuel reserves.
He said with sufficient fuel reserves, the government could have a fall back option to supply fuel in the event that there is fuel scarcity in the country. He also said the speed at which cargoes were cleared at the ports was low, a development which affects distribution of the product across the country, coupled with the decision by some marketers to divert petroleum products to neighboring countries.
Speaking at a meeting of the joint committee of the Senate and House of Representatives, recently, Kachikwu blamed the fuel scarcity on saboteurs, adding that they have been undermining government’s efforts to improve fuel supply through imposing illegal charges on truck owners.
“The causes were: first, diversion was very key and second, there were logistics issues. Once those diversions began Apapa Wharf was a problem to be able to move things due to bad roads. Lack of sufficient reserve in our system also made us unable to respond to the supply gap arising largely from the fact that private sector pulled out from supply,”he said.
He continued: “There has been a loose enforcement on diversion of fuel in the country and we have not been able to police our depots adequately.” The Minister also added that the disparity in the landing cost has prevented private marketers from importing petroleum into the country.
Scarcity self-inflicted, say stakeholders
While the Minister’s and the NNPC’s explanations may sound plausible, a common thread that runs through them is perhaps, an attempt to ignore the more fundamental challenge of lack of political will by successive governments to holistically address the country’s lack of local refining capacity. The thinking of not a few stakeholders, particularly marketers, is that the lingering fuel crisis is a subset of the problems in the nation’s oil & gas industry.
For instance, the Secretary of Major Oil Marketers Association of Nigeria (MOMAN), Mr. Femi Olawore, did not mince words when he said fuel scarcity persists in the country because the Federal Government has failed to resolve issues that border on the operation of the refineries.
According to him, the four refineries put together produce below 100 per cent, despite the decision by the Federal Government to fix them. He was specific that efforts by the governments to rehabilitate the refineries, coupled with huge some of money sunk into them, have yielded little efforts as the refineries have failed to process enough crude to serve the country’s needs.
Independent Petroleum Marketers Association of Nigeria (IPMAN), Chairman in Southwest, Alhaji Debo Ahmed, agreed with Olawore. He described the refineries’ condition as worrisome. According to him, the refineries produce below capacity, which made the government to resort to fuel importation.
“The four state-owned refineries namely, Warri, Port Harcourt 1&2 and Kaduna refineries are partially operating. They operate between 30 per cent to 40 per cent and sometimes 50 per cent, and these figures are too small for the country to achieve fuel sufficiency,”Ahmed pointed out.
The IPMAN Chairman was emphatic that “fuel scarcity will continue to exist in Nigeria as long as the Federal Government fails to put in place measures to solve the problems facing the refineries once and for all”.
He also said the cost of importing fuel into the country was high, adding that the development has made it impossible for the marketers to have fuel in their outlets. He told The Nation that marketers are not comfortable with the rising cost of importation of fuel into the country.
The disparity in the price at which fuel is being brought into the country, he said, was as a result of the needs and destinations of the refiners abroad. “The refining companies abroad have different prices and often times, the prices are determined by the capacities and locations of their plants.
“If a refinery offers a litre of fuel at the rate of $350, another firm may charge lesser amount to refine fuel, while the price may be higher in another firm. By the time marketers add other costs to the cost of refining the product, the cost becomes unaffordable to the marketers,”he said.
Ahmed also explained that the problems in the industry are inter-dependent because they relate to one another. For instance, he said if a problem exists in the exploration arm of the industry it has cumulative effects on other arms such as production, refining and distribution of petroleum by-products such as petrol, diesel and kerosene.
Ejigbo Satellite Depot IPMAN Chairman, Alhaji Alanamu Balogun said the government has cut down fuel supplies to marketers, following the scarcity of fuel, which gripped the country during the Christmas and New Year period.
He said the NNPC could not afford to supply the product in sufficient quantity to meet the needs of over 170 million Nigerians. According to him, getting fuel to buy has become a serious problem, especially in the Northern and Eastern parts of the country. This is because the NNPC has drastically reduced the supply of fuel to the marketers, due to scarcity. “This explains why many people cannot, as usual, go to petrol stations and get the product easily,” he said.
Also, Executive Secretary, Depot and Petroleum Marketers Association of Nigeria (DAPMAN), Mr. Femi Adewole, said the removal of subsidy and failure by the Federal Government to pay the subsidy arrears owed marketers were responsible for the fuel scarcity, which gripped the country in December 2017 and extended to early 2018.
He said the government owed marketers $2 billion, about N500 billion in subsidy arrears. He accused government of hurting the marketers by refusing to pay the subsidies owed them, adding that marketers are unable to import fuel because of government’s failure to pay the subsidies.
Adewole said: “We (marketers) have made our submission to the government that the fuel scarcity was as a result of removal of subsidies, non-payment of the arrears and the price of crude that remained in December following the hurricane Katrina in the month of September-October. As a result, prices of crude went up and marketers lost the ability to import fuel at N145 per litre.”
Reliable industry sources confirmed to The Nation that the Federal Government indeed, moved to sort out issues around payment of subsidies with a view to reducing the burdens of importation of fuel on marketers, especially those that belong to MOMAN and DAPMAN).
The government was said to have fulfilled its own side of the bargain with regards to an agreement reached with the marketers to pay them subsidies. However, the government at a point stopped the payment, following the discovery that the subsidies were allegedly being diverted to other uses by some marketers. This made the affected marketers to stop importation of fuel.
Obsolete facilities
are pains in the neck
Balogun added that apart from the fact that the demand for fuel outweighs supply, there is also the problem of obsolete facilities at depots, as many of them cannot boast of enough tanks to store products supplied to them by the NNPC.
His words: “Fuel scarcity persists because NNPC cannot supply enough fuel to the depots because the facilities are moribund. Imagine a situation whereby marketers are coming from Abuja, Ilorin, Ibadan, Ore and other depots to load in Ejigbo.
“Before, Ejigbo depot was loading 120 trucks or more a day. But the depot is now loading below 60 trucks a day. Out of the 60 trucks, the depot will give Ore depot two or three trucks, give Ibadan two trucks and other depots around.”
He said at the end of the day, Lagos is left with 30 or 40 trucks, which according to him, are not enough to meet the consumers’ needs.
Consumers groan
As the scarcity persists, some consumers have been screaming blue murder, describing the situation as a national embarrassment. For instance, a commercial bus driver, Mr. Sunday Ojuolape, lamented how he struggled to get fuel for his 18-seater bus.
Ojuolape, a resident of Abule-Egba, a Lagos surburb, said the fuel situations have not improved despite assurances by the authorities in the Ministry and the NNPC that the scarcity was being addressed. He said many of the fuel stations are complaining of not having enough fuel in their dumps.
The commercial bus driver kicked that because of the product scarcity, he had to pay more to get fuel. “And to make matters worse, any attempts to pass the burden on to passengers is being resisted, leading to constant quarrels,”he said.
A marketer in Ilorin, who declined to be mentioned, said fuel is scarce in the ancient city. He said it has become difficult for him and his colleagues to get enough fuel to sell, adding that the issue is making it difficult for their business to survive.
Importation digs
hole in govt’s purse
Beyond consumers’ lamentations, the huge capital flight caused by unbridled importation of petroleum products, especially fuel, has remained a serious blight on government’s efforts to turn the economy around.
According to Kachikwu, Nigeria spent a whopping N2.068 trillion on the importation of petroleum products within a nine-month period, from January to September 2017, rising by 14.32 per cent from N1.809 trillion recorded in the same period in 2016.
According to data obtained from the National Bureau of Statistics (NBS) foreign trade statistics for third quarter 2017, of the total petroleum products imported, N1.541 trillion was spent on PMS importation.
A breakdown of the country’s petroleum products importation on a quarter-on-quarter basis showed that N757.397 billion, N707.475 billion and N602.889 billion were spent on the importation of the commodities in the first, second and third quarters respectively, compared to N434.39 billion, N598.36 billion and N776.947 billion recorded in the first, second and third quarters of 2016 respectively.
NBS said in the third quarter of 2017 alone, the country spent N476.755 billion on petrol importation, representing 20.30 per cent of total imports in the same period, while gas oil importation accounted for 2.42 per cent of the country’s total importation with N56.752 billion.
Nigeria produces about 1.8 million barrels of oil daily, but imports an average of between 2 billion litres to 4.2 billion litres of fuel monthly. The thinking is that if the huge petroleum products import bill is halted by fixing the refineries, the money could be channelled into fixing infrastructure, which has been a pain in the neck of operators in various sectors of the economy.
Way forward
Apart from the need to urgently fix the refineries, not a few industry stakeholders have called for full deregulation of the downstream sector of the oil & gas industry. Some of them, who spoke with The Nation, argued that deregulation brings more players into the production, exploration, refining and trading of petroleum products.
For instance, Integrated Oil and Gas Limited Chairman, Capt. Emmanuel Ihenacho (rtd.), said deregulation will have the long-term effect of making fuel available in the country. He said any attempt by the Federal Government to fully deregulate the down-sub-sector of the oil and gas industry will revolutionise the industry by opening the door for more players.
He, however, applauded the government for allowing private investors to invest in refinery operations, adding that the idea would help in improving domestic consumption of fuel as well as bringing more revenue to the government.
“Dangote Petrochemical Refineries is coming on stream in 2019 to refine 650,000 barrels of crude per day. This is not only huge, but it will also afford Nigeria the opportunity to export processed petroleum products to neighbouring countries. The development will in no distance future help the country achieve self sufficiency in fuel usage,” Ihenacho said.
He also expressed optimism that the establishment of modular refineries will re-invigorate the sub-sector, as it is going to open door for more operators in that segment of the industry.
“By allowing people to be licensed as modular refinery operators, the government is trying to improve on the quality and volume of refined petroleum products in the country,” Ihenacho pointed out, adding that the initiative will also galvanise other economic activities in the country.
Ahmed could not agree less. He said modular refineries are the way out of the lingering fuel scarcity in the country. He, therefore, urged the government to bring more investors into modular refinery activities.
Sound recommendations, no doubt, but it remains to be seen how government responds to them. What is clear, however, is that until and unless government summons the political will to address these issues, the problem of fuel scarcity in the country will remain.
