How Nigeria spent N15.9tr on fuel import

Nigeria has spent N15.97 trillion on the importation of 152.92 billion litres of petroleum products between 2010 and 2016, although pockets of shortages still rocked the country at different times. This is according to import data calculated and analyzed by Daily Trust on Sunday.

Interestingly, the data showed that fuel import cost and volumes rose higher in 2016 compared to other years despite the perceived decline in consumption due to the increase in fuel prices, the removal of subsidy, rising inflation and the general harsh economic climate that characterized 2016.

The continued slump in global oil prices last year coupled with months of militant attacks in the Niger Delta region cut Nigeria’s oil output by up to half as well as hammered its foreign exchange earnings, squeezing access to the dollars required for fuel imports.

But the above factors which were supposed to affect the volume of petroleum products importation, had little or no impact on import and consumption of the products, going by the data analyzed. Experts predict that petroleum import bill will continue to rise due to the high cost of sourcing the dollars for import.

Fuel import statistics sourced from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), Petroleum Products Pricing Regulatory Agency (PPPRA), Nigerian National Petroleum Corporation (NNPC), the Nigeria Extractive Industry Transparency Initiative (NEITI) and independent analysts predictions, pointed to how Nigeria’s struggling domestic refining system has left it reliant on imported fuel more than ever before.

Petroleum product imports often account for around 16-20 per cent of Nigeria’s total import, according to the NBS data, ranking it among the world’s top 15 countries where fuel imports comprise large share of total imports, World atlas figures also showed.

Despite being Africa’s top crude oil producer, Nigeria imports more than 80 per cent of its petroleum products. It is the largest petrol importer among oil exporting countries in the world, according to the NNPC’s Chief Operating Officer (COO), Upstream, Alhaji Bello Rabiu. He noted that the development was due to the country’s low domestic refining capacity.

The NBS petroleum import 2010-2015 and 2016 statistics citing figures supplied by the PPPRA revealed that the country spent N1.7tr, N3.1tr and N2.8tr in 2010, 2011 and 2012 respectively with petrol accounting for more than 80 percent of the products imported.

The data collated for subsequent years showed that Nigeria’s importation of the three products (petrol, diesel and kerosene) jumped to N3tr and N3.2tr in 2013 and 2014 before dropping to N1.8tr (excluding Q4 import numbers). That figure could swell if import figures for the last quarter of 2014 were available.

Ever since, the value and volume has continued to increase, based on the data cited. The country spent N2.59tr importing petroleum products in 2016, N1.3tr more than it spent in 2015 and 4bn litres more than the volume imported in 2015.

The numbers for 2016, remain a bone of contention in the industry, based on the factors mentioned earlier.

“Fuel import reduced by 35 per cent in 2016. What went higher was the cost of import because of the fall in Naira. Pre-partial deregulation we were importing 50m litres daily, now the import is about 30-32m litres,” said Mr. Taiwo Ogunleye, a Lagos-based expert in oil and gas law.

In dollar terms, using the average import exchange rate of N255 to $1 for fuel imports in 2016, Nigeria spent an average of $21m every day importing fuel, according to the NBS figures. It translates to around N5.5bn daily in naira terms.

The 2016 value which is around $10bn or an average of $833m monthly has become a huge burden on the nation’s foreign exchange in the face low crude oil production and prices. Fuel imports, findings showed, is still a big strain on the market for dollars.

“The sums spent on imports would have provided us three new state of the art refineries, built two gas plants, upgraded the depot system in 12 areas” Mr. Ogunleye said, adding that massive import bill would have built three international airports, provided 2500km of rail across the country, “The amount is huge,” he notes in an email.

Nigeria consumes 45 million litres of petrol a day, a figure hotly contested; and it would require the market to provide some $18 million a day. Fuel is imported into the country by the NNPC and private marketers, with each usually providing half the total needed, but the NNPC said it has been providing some 90 per cent in recent months.

In terms of sectoral utilisation of foreign excgange for visible trade, oil sector imports continues to rank highest among industrial, agricultural and manufacturing sectors, according to CBN statistics. The CBN in its economic report for H1 2015 placed the amount of foreign exchange utilized for the oil sector at 31.2 per cent, industrial 30.2 per cent and manufactured product 16 per cent, among others. At least $4.45bn was spent in the first (H1) of 2015 on oil imports. Data for subsequent half and year are still being awaited.

The NNPC last year said it spent between $16m and $20m on imports daily totalling about $1.8bn per quarter. Though import bill depends on volume and the price, a cargo of roughly 40 million litres product could cost the corporation about $13m to $14m daily.

According to the NNPC, the average share of Nigeria’s crude for sale is less than one million barrels which means that the total amount Nigeria could earn from crude export could be around $40m assuming oil price is $40/barrel. Close to half of the amount is used to import products, leaving a lot of implications for the economy.

Nevertheless, most of the fuel imported into the country do not get to the targeted Nigerians. Minister of State for Petroleum Resources, Ibe Kachikwu, said in April 2016 that over 30 per cent of petrol meant for Nigerians is diverted to neighbouring countries including Chad and Cameroun citing example of how out of the 400 NNPC petrol trucks sent to Lagos only about 250 offloaded their contents.

Worst of it all is that acute scarcity of the products has continued unabated at especially remote suburbs across the nation.

Experts project that fuel consumption is likely to increase in 2017 driven largely by expected improvement in the macroeconomic environment and stronger efforts to improve supply of petroleum products from the NNPC refineries and imports.

Pan-African lender Ecobank said in a note that it expects the major retailers to ramp up efforts to push volumes and secure more market share because of the favourable margins on petrol.

“Although the economy is unlikely to fully recover from recession in 2017, it is likely to witness some level of growth that will ensure a positive growth in fuel consumption. Fuel consumption (gasoline, diesel and kerosene) is expected to rise to 22.5 billion litres in 2017 from an estimated 22 billion litres in 2016,” the bank said in its outlook for Nigeria’s petroleum industry.

While noting that further deregulation of the downstream is expected in 2017, due to the continued rise in the cost of sourcing petroleum products and that the increase in crude oil prices is expected to boost the country’s oil revenues, it warned that “the cost of petroleum products may also have to increase. Currently landing costs have risen significantly but the NNPC is the main importer for gasoline and has thus imbibed some of the increase in product costs to ensure prices remain unchanged. However, it could be forced to raise prices or fully deregulate to avoid increasing its operating deficits.”

It was gathered that the rising fuel import bill presents a big challenge to the present government’s liberalization policy which was supposedly to reduce fuel consumption, lower imports, diversify to cheaper fuels. Not forgetting, the government’s persistent promise that it was doing all within its powers to ensure the refineries are back to life to boost local production of petroleum products.

Maikanti Baru, NNPC group managing director during a visit by the Management of Media Trust Limited, assured that the corporation would reduce petroleum products importation by boosting the capacity of local refineries to 60 per cent by the end of 2017.

“We should achieve 60 per cent capacity utilisation this year or first quarter of 2018 and get to 80 per cent by the end of 2018,” he said.

Industry watchers say it is critical for the refineries to perform optimally in 2017 if the huge import numbers must come down.

The refineries are expected to function at a slightly better level in 2017 due to plans by the NNPC to embark on a comprehensive rehabilitation of the three refineries, Ecobank analysts added.

This, they said, is expected to reduce the current scarcity of products especially diesel, which is affecting reliability of flight schedules.

An alternate pipeline from Niger Republic to supply crude oil to the Kaduna refinery is being considered.

“In our opinion, a potential deal with the Niger Delta militants could reduce the level of disruption in supply of crude oil for processing at the refineries. This is the most important step followed by the massive rehabilitation of the refineries,” the analysts said.