Artificial scarcity to test subsidy removal
Nigerians pay extra naira to buy fuel caused by ‘dirty-fuel’ importation; 387.6m litres from NNPC not enough Marketers, attendants rip-off Nigerians to make up for economic hardship
IN WHAT HAS BEEN TERMED a strategic move by Nigeria’s federal government, there was a planned adoption of a full scale cost-reflective power tariff, as well as the implementation of petrol subsidy removal by the second half of 2022, which left many analysts to warn of the fresh price pressure the move would exert on Nigerians, with
inflation rate still above the monetary policy rate at 15 percent.
But it is now emerging from current realities in the Nigerian petroleum sector that the government is subtly moving to raise the price of petrol or PMS with the current self-created artificial scarcity of the commodity, despite the positive rally of crude oil to above $105 per barrel in the international market.
Without taking attention away from the invasion-induced unrest in Europe that is bringing about the show of armoury, arsenal and military superiority, plus the trending news of rising oil price to around $105 per barrel in the global oil market, the domestic trending case of dirty fuel in Nigeria that has opened the opportunity for petroleum product marketers to create artificial scarcity across several states of the federation, is now so worrying, leading analysts to demand a rallying cry.
Stakeholders have been left wondering what exactly could be going on with many questions being asked if this could be the federal government gradually and subtly attempting to push up the pump price of petroleum products after it had earlier shelved its fuel subsidy removal plans for a later date.
Several analysts have avowed that the U-turn by the government on the planned subsidy removal was motivated by the need to gain the confidence of the electorates at the forthcoming polls which is less than 360 days away.
One serious bone of contention in this situation is the fact that oil marketing company employees, in apparent agreement with their employers or managers, have taken to the act of enriching their purses by taking undue advantage of Nigerians by demanding gratification before they dispense petroleum products to motorists. This unwholesome behaviour has for a long while continued to reveal some loopholes and the existence of market inefficiencies created by the government, as well as, the NNPC, on the effective management of product distribution in the bid to eliminate the artificial scarcity and the long queues witnessed across fuel stations.
Business A.M. visited a few selected fuel stations in Lagos and found that in Aguda, Surulere area of Lagos State, some of the fuel attendants were collecting N500 from vehicles and N200 from bike riders, popularly known as Okada, and those buying in jerry cans. It was the same in the Olodi-Apapa axis, where motorists are made to pay between N300 and N500 to get PMS for use. Along the International Airport Road motorists had to tip fuel attendants N500 or N1000 depending on the amount wanted to be sold to you.
An attendant who agreed to speak with Business A.M. on condition of anonymity said the economic situation has brought hardship to the average Nigerian and this is an opportunity to generate revenue for themselves and the company they work for. We found that profits realised daily from these illegal sales are shared between the management and the individual attendant, an indication of how bad things really are in the country.
Okwudili Ijezie, a financial analyst and chartered accountant, who expressed his displeasure to Business A.M. about the artificial fuel scarcity said, “The fuel scarcity is most unfortunate. In my Estate in Lagos, it is complicated by Ikeja Disco that equally hardly dispenses electricity to us. Due to the need for one to generate privately his electricity, via generators, this fuel scarcity is biting hard on us and patronising the black market is really taking a toll on us, financially. I implore the NNPC to do all it can to restore normalcy and also to investigate the cause of the scarcity and mete out appropriate sanction to the culprits.”
Speaking on the postponed fuel subsidy removal by the federal government, the analyst said “The postponed fuel subsidy plan by FGN, in my humble opinion, was not well thought out. The idea of increasing the pump price of fuel by over 100 percent was an invitation to chaos. It would have torpedoed the economic achievements of the FGN, as inflation would have spiked by at least 100 percent.
“And considering that we are in an election year, the implications would have been devastating for the ruling party. Labour (NLC) has already given a notice that it would go on strike and the implications of a nationwide strike would be too devastating to the ruling party, APC, in an election year. Also, the N5,000 (five thousand naira) stipend to 40 million poor Nigerians per month, is a crafty way by the politicians to fund the 2023 elections. It is similar to tradermoni. How do they get the statistics of the 40 million poor Nigerians?” Ijezie asked.
For more than a month, there was a news break which was confirmed by the Nigerian National Petroleum Company (NNPC) Limited on the importation of methanol-blended Premium Motor Spirit, popularly called petrol, by four oil marketers into the country which has caused outrage. The importation by these firms came through four cargoes under NNPC’s Direct Sale Direct Purchase arrangement.
These companies, according to a statement by the NNPC, include MRS, which made the importation through a vessel named MT Bow Pioneer; others are Emadeb/Hyde/ AY Maikifi/Brittania-U Consortium through a vessel identified as MT Tom Hilde; Oando through a vessel named MT Elka Apollon; and Duke Oil.
However, Emadeb, Oando, Brittania-U and MRS have since denied the allegation made against them by the NNPC. The state-owned oil company would later announce the efforts it was to withdraw the dirty fuel from circulation. It promised that over 2.3 billion litres of PMS would be delivered before the end of February 2022 to totally arrest the situation.
It would be recalled that Kyari, chief executive of NNPC Limited, the sole importer of PMS, had flown the first kite about a possible fuel price increase, when he disclosed he had spent N860 billion on subsidy for that year 2021. And it was on account of dwindling revenues into government coffers, that they began to push subsidy removal vigorously.
Again, the NNPC CEO once told a gathering about the unsustainability of the subsidy regime, and hinted that the removal of subsidies will push the pump price of petrol to between N320 per litre and N340 per litre while it spent close to N700 billion on PMS subsidy.
Analysts at Financial Derivatives Company (FDC) Limited have noted that although the move to eliminate subsidies is in congruence with the provisions of the Petroleum Industry Act (PIA), it would lead to higher logistics costs and further stoke inflationary pressures.