Tag: Dangote

The news coming out of the Nigerian oil and gas sector in the last few weeks has been uniformly bad and threatening to get worse. The distress in this sector was first seen when the price of cooking gas suddenly went through the roof in the wake of a spiteful strike no less suddenly declared by powerful trade unions within the petroleum industry. Gas supplies to key areas including the Dangote refinery were shut down, in an attempt to cripple the operations of the Dangote refinery. According to the strikers, they were determined to protect the expressed interest of their so-called members who, as they claimed were slaving with little reward to produce the fuel which was to be sold to innocent Nigerians. This was a naked attempt to unionize the work force against the wishes of the company management. When this excuse was seen to be increasingly transparent and untenable, the focus of the strike was shifted to take in some workers who had allegedly been relieved of their jobs for no reason other than that they had chosen to join a union. Whatever the reason for the strike, the result was catastrophic. The operation of the Dangote refinery was crippled, cooking gas prices were doubled, the price of petrol at the pumps went up and queues began to form for the first time in more than a year. Although common sense was made to prevail in the end, a great deal of harm had been done, not the least being the inching up of the cost of petrol. This is especially worrisome because of the knock on effect of this to inflation. Every Naira increase in the price of each litre of petrol sold was sure to tick up the rate of inflation which, must have been terrible news to the managers of the economy.

The cost of petrol is high, punishingly high and the renewed increase in the price of petrol is threatening to wipe out the gains that have been achieved in the fight against inflation, perhaps the greatest threat to the nation’s economy. The other front in our battle for recovery from the malaise plaguing our economy is of course the stability of the value of  foreign exchange and this has also been brought into play to the further detriment of the economy. The issue of the value of the Naira vis a vis the American dollar has been a fiercely burning one for all of forty years; since our flighty if not outrightly flaky but dangerously violent government of the day, quite ill advisedly pitched the value of the Naira against that of all convertible currencies. The excuse given for this marked idiocy was that it claimed that it was following what turned out to be the jaundiced advice of the IMF. Following this, we became sheepish clients of the twin economic terrorists otherwise known as the World Bank and the IMF. Quite apart from any other consideration, the coming to life of the Dangote refinery was supposed to ease the pressure on the Naira which had become so distressed that it lacked a discernible heart beat. It had been brought to this sorry pass at least partly because for many years, large sums of foreign exchange had been committed to the importation of vast quantities of petrol in an opaque manner under what is now a discredited fuel subsidy regime. It had become imperative that the Naira be put back together if we were to remain an economic entity. The time for any experimentation with our currency is long past. What has to be done is to closely monitor the use of any available foreign exchange and throwing any of it in the way of fuel importation has to be described as criminally negligent. But this is precisely what a group of Nigerians who proudly described their association as that of fuel importers were defending. Apparently they scout the world for the cheapest available petrol, load the fuel into any available transport enroute Lagos. The fuel is then stored in large depots described as tank farms from where it is distributed all over Nigeria in diesel driven tankers. This has been the tried and tested formula for several decades and has become an addiction. A drug on which the operator had become hopelessly psychologically dependent. Now, they cannot see any way to deal with what ails them and they expect the country to suffer the extreme symptoms of withdrawal with them, a classic aspect of drug addiction behaviour. A drug addict will sell their mother and siblings thrown in for good measure in order to feed their habit. It is left to his significant others to take steps to save themselves.

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To tell the truth, in economic terms, the Nigerian economy can rightly be described as being on life support, a patient that needs the constant care of a carefully assembled team of variously talented and extremely well trained specialists who must quickly respond to all the symptoms which assail their patient. In other words, we are in a state of emergency. This is why it is baffling that the managers of our rescue mission, that is, the government did not respond more robustly to the situation precipitated by the drug users among us. No union should be allowed at this critical point in time to use their immense power to jeopardise the economic well being of Nigeria. More than a year after the Dangote refinery began producing petrol, it is bewildering that the Central Bank is still providing foreign exchange to the tune of more than a billion dollars this year for the importation of fuel. With locally refined petrol available, allowing such vast amounts of what can only be described as scarce foreign exchange to be incinerated on the altar of fuel imports is, to be honest, downright unacceptable. This is more so when for the first time ever in the history of our country, refined petroleum products are being exported from these shores. The time has come for a comprehensive review of what we can afford to spend our foreign exchange on. Dangote can be said to have presented the nation with a facility which can take care of the supply of petrol to run our economy. The best that can be done for the foreign exchange hungry importers of petrol is to phase out the availability of foreign exchange from the Central Bank over a defined period of time, say twelve months. This period should be enough to take care of whatever withdrawal symptoms they may be suffering from. The harsh reality is that the era of fuel importation is now over and those who have grown fat on profit from this arrangement are like dinosaurs whose extinction time has arrived. They have to go. This is in obedience to the iron laws of nature and indeed, economics. It would be counter productive for fuel importers to set themselves up as competitors to Dangote. In the first place, the news from Lekki is that there are plans afoot to double the productive capacity of the Dangote refinery in short order. The other consideration and one which may not be of immediate importance to the fuel importers is that there are at least sixteen different fractions into which Dangote can break his supply of crude oil. They may be frothing at the mouth in respect of petrol but what about the other fifteen fractions? There is no contest.

Nigeria has always been the exporter of her natural resources. This is one of the reasons why our economic development has been slow, abysmally so. We have sold our natural resources for a pittance and have compounded our economic weakness by importing the refined products of those same raw materials at astronomical cost. We now have the opportunity to be a net exporter of refined petroleum products so that we can stop exporting crude oil in favour of the more expensive refined petroleum products. It is ironic that we have been importing refined petroleum products from places which do not produce a drop of crude oil. For example, the Netherlands has an installed capacity for refining 1.2 million barrels a day. A lot of the petrol imported into Nigeria comes from there and surely, the time has come to reverse that trend and we will soon be able to do that. All we need is the will to do so. The export of refined petroleum products from Nigeria must be seen as a trend which we need to extent to the other raw materials for which we are famous; cocoa, cotton, hides and skins as well as various minerals. It is only by doing this that we can begin to build up a solid economy.

There is little doubt that the most important commodity within Nigeria’s economy today, is petrol followed by diesel, kerosene and lately, cooking gas. A long time ago, kerosene would have been at the head of that list, at the time when it was used to lighten the darkness which descended each day at dusk. That is talking about a very long time ago, long before independence. By the sixties, kerosene was in highest demand when kerosene stoves became available and practically all urbanites depended on it for cooking their food, in favour of using wood or charcoal. Now that more convinient and efficient gas cookers are in vogue, kerosene has taken a back seat to the other fuels. At the height of its popularity, every neighbourhood had someone who sold kerosene in bottles and could be roused at any time of day or night to take care of any emergency caused by the shortage of kerosene at some critical juncture. Later on, kerosene became available in petrol stations which from time to time were decorated with long lines of plastic containers waiting to be filled with the precious fluid in distressingly too many times of inevitable scarcity.

Now, petrol is deservedly at the top of this fuel queue because it is used as the major propellant on which the country is run. Whenever there was a shortage of petrol, the country was grounded, with long vehicle queues at any petrol station dispensing the precious fuel, usually at mercilessly inflated prices. This was the situation for a little over fifty uncomfortable years. Petrol is by far the preferred fuel for shifting all kinds of vehicles in Nigeria, with the exception of the long distance, usually articulated trucks used in the delivery of goods all around the country. The sale of the diesel used in these vehicles was deregulated many years ago and even under the notorious subsidy regime, diesel was always terribly expensive and perhaps therefore, also always available. In any case, it would have been ridiculous to have long queues of articulated lorries at petrol stations.

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Taking everything into consideration, it can be concluded that there is a high usage of petrol per capita in Nigeria. This is why the cost of living is so neatly tied to the cost of petrol per litre. Any increase in the price of petrol is reflected instantly in the cost of practically all commodities and everyone feels the pinch instantly. There is no reason why this is not so. An illustration will prove this point as it was proved to me by observation many years ago. In that instance, I saw an old lady coming from the farm with a small load of wrapping leaves. She was trying to move her leaves to a nearby urban market at a time immediately after a steep increase in the price of petrol. Transport fares had also been increased to reflect the new price of petrol. Whatever profit the poor lady was entitled to, was immediately wiped out and the only way that she could keep her head above water was to increase the price of her leaves in equal measure. This increase was in turn, passed on to the moi-moi seller who also passed it on to her customers and by so doing, put some fire under the figures for inflation, causing them to soar destructively. The converse is of course also true. A reduction in the cost of petrol will douse the flames of the inflation which at this time is devouring our collective happiness and well being.

I have no doubt in my mind that a substantial drop in the price of fuel, especially petrol, will give us the slack we sorely need, in order to breathe. The only way to get this done at this material time, is to cut the Dangote refinery the slack that it needs to bring down the cost of petrol and maybe, as an afterthought, the price of cooking gas as well. The first point that must be noted in this regard is that the Dangote refinery has the capacity to do this and more. All that needs to be done is to climb down from his back. Given the extant circumstances however, this is easier said than done. But, it has to be done all the same. This is why the signals and threats now coming out of many quarters are so worrisome. Dangote is now in this pivotal position because, more than ten years ago, he took the decísion of investing in a refinery. An identical decision could have been taken by any number of well heeled Nigerians, before and after then. But nobody had neither the foresight nor perhaps the audacity to do so, leaving Dangote in his current position of profitability and massive authority. That position is not only visible but it is also above any challenge in the near future.

We are told that Alhaji Dangote is now worth close to 30 billion dollars. That is a humongous sum of money by anybody’s accounting. Were he to spend a million dollars everyday on whatever caught his fancy, he cannot live long enough to spend more than a small fraction of this sum. That is how big it is. It would therefore be a sad negation of his privileged existence if he decided to put sheer profit before principle at this time. The only way for his life to show any purpose is to stake his huge personal fortune on the future of Nigeria. Were he to fail in that purpose, it would be a heroic failure, worthy of being told and retold all down the ages and that in itself is grace and significant historical significance. Given the trajectory of his life up till now however, it is inconceivable that he would not be successful in this respect. To what purpose would it be if he continued to pile up the dollars which can be ascribed to his name? None is the simple, straightforward answer. From this admittedly rosy position, it is ridiculous to think that his primary objective is to build up a monopolistlc control of the fuel market. It will not work anyway if only because even as we speak, there are other local refineries under construction and it is only a matter of time, possibly a number of months before at least one other refinery comes on tap to give him some real competition. It is laughable for those who do no more than import, store and then distribute fuel of whatever quality to claim that they are genuine competitors. They may be so in their heads but in reality, they are only so in their dreams. It is a waste of time to advise them to come out of their dream and set up their own refinery. They simply are totally incapable of doing other than what they are doing now, that is to collect rent on their depots and shift petrol around the country in expired trucks, many of which are incapable of passing any decent road worthiness test. Even from that point of view, they cannot be regarded as being capable of offering any competition to the gas powered trucks mobilized for fuel distribution by Dangote. We can say that with those trucks, Nigeria is moving into a modern and safer mode of fuel distribution. Even then, until fuel is sent round the country in underground pipes, Nigeria will not be classed as a country with a modern fuel distribution system. In the meantime, the use of Dangote trucks for fuel distribution must be regarded as non-negotiable both from the point of safety as well as accountability. Without due accountability, there is no guarantee that considerable volumes of petrol will not stray across our notoriously porous borders.