Taming the fuel scarcity monster
Group Managing Director of the Nigeria National Petroleum Corporation [NNPC] Dr. Maikanti Baru’s firm declaration in Abuja last Friday that “the monster of fuel scarcity” that has bedevilled this country for most of December “has been tamed” was premature. Baru said “the worst times of the fuel crisis are over.” Maybe so, but the crisis itself is not yet over as long queues persisted and in many parts of the country, this past weekend. Tens of thousands of people are also preparing to return to their work stations at the end of the holiday period, which will add to the challenge.
The current fuel scarcity experienced in the country made this year’s Christmas season a nightmare for most Nigerians, especially those who travelled home to celebrate with loved ones. It has also been one of the most confusing. After nearly a month, Nigerians are yet to see through the contradictory claims and counter-claims between different players in the oil market. Last Friday Baru blamed independent marketers for the fuel crisis, which he said was triggered by a rumour that the pump price of petrol would be increased. President Muhammadu Buhari spoke for the first time on the fuel crisis just before Christmas. He also blamed hoarding by marketers. He ordered NNPC and security agencies to seal off fuel stations found to be hoarding fuel and to dispense the petroleum free to the public. Buhari also said, “I have directed the regulators to step up their surveillance and bring an end to hoarding and price inflation by marketers...I thank you all for your patience and understanding.”
The question is, why did the marketers suddenly begin to hoard fuel products and create a crisis that we have not had in this country since early 2016? NNPC boss Maikanti Baru referred to a “rumour” that fuel price will be increased but judging by other things he said, the rumour was not baseless. The GMD said last Friday that “the landing cost of petrol is now N171.40 per litre.” Remember that almost the entire national fuel requirement is now imported since NNPC’s four oil refineries hardly refine any fuel. Baru however believes marketers have no reason to hike petrol prices because NNPC, which is the only agency that imports fuel, sells it to marketers at N133.28 per litre. He said, “If NNPC sold it to you at N133.28 you have sufficient margin within that ambit to be able to supply and sell to the public at maximum N145 per litre.” Buhari, Baru said, had directed “that the pump price of N145 per litre must be sustained” so the Department of Petroleum Resources [DPR] and Petroleum Products Pricing and Regulatory Agency (PPPRA) “have been mandated to seal off any petrol station selling above the approved pump price of N145 per litre.”
That NNPC is the only agency importing fuel is bound to cause a scarcity, as indeed Minister of State for Petroleum Ibe Kachikwu said earlier this month that there was a “shortfall” in supply. The marketers stopped importing fuel, according to them, because of the recent rise of crude oil prices in the international market, which made it unprofitable to sell at the approved price inside the country. Executive Secretary of Depot and Petroleum Products Marketers Association [DAPPMA] Olufemi Adewole said, “Landing cost of PMS has increased. By the time we land the product based on the international crude oil prices, petrol should be selling for between N165 and N170 per litre. But government is saying we should sell at N145. So, if there is no subsidy, we have to depend on NNPC to give us the product.” National Operations Controller of Independent Petroleum Marketers Association of Nigeria [IPMAN] Mike Osatuyi also said, “When the crude price hit $59 per barrel, we could not sell petrol again at N145 per litre if we were importing on our own. The landing cost of PMS is N154. If you are importing at N305 to the dollar, by the time you add bank charges, it comes to N307 to the dollar. If you apply that to the current crude price, the landing cost is N154-N155. By the time you add all the margins, the pump price is about N160-N167. Before private importers can resume importation, the exchange rate to a dollar must be N250 and we can sell at N145 per litre.”
Add to that the ongoing tugof-war between NNPC and marketers, with each alleging that the other owes it money. NNPC said last Wednesday that members of DAPPMA owed it N26.7 billion as at December 21, 2017 for products supplied to them on credit. DAPPMA replied the next day, saying NNPC owed its members over N90 billion which they paid to its subsidiary, Pipelines and Products Marketing Company (PPMC) for petrol that has not been supplied to them. Its executive secretary Adewole also said, “PPMC and NNPC do not transact business with DAPPMA members on credit, hence we are not aware of any indebtedness to them by our members.”
On top of that, senators raised questions last week as to why NNPC is subsidising fuel at N26 per litre when no money has been voted by government for subsidy, much less appropriated by the National Assembly. The Senate Committee on Petroleum [Downstream] headed by Senator Kabiru Marafa was directed by Senate President Bukola Saraki to hold a public hearing on Thursday this week and bring all the stakeholders together. Clearly, something must give way. The Federal Government has several options, all of them unpalatable. It must either raise petrol pump price steeply and risk strikes and riots; restore the subsidy regime with all the attendant dangers of corruption; supply forex to fuel importers at a highly subsidised rate, which would create more avenues for fraud and corruption; or it could deregulate the fuel market entirely. Unless tough decisions are made, the monster is still lurking around the corner.