Why petrol is expensive in oil-rich N/Delta

Despite churning out the crude oil that Nigeria swaps to import petrol, residents of the Niger Delta region spend more amount of money to buy a litre of petrol than far-flung regions, investigation by the Daily Trust on Sunday has shown. Access to cheap petrol has proved even more overwhelming for people in the region where poverty is pervasive due to oil and gas operations that constantly devastate the environment and economic activities.

Investigation revealed that despite its nearness to two refineries located in Port Harcourt and Warri and several illegal refineries, petrol is expensive in the Niger Delta compared to other parts of the country.

Our reporter visited oil producing communities in Bayelsa and Cross River States and found that residents buy petrol at an average price greater than the price paid by residents of other regions in the country.

With the exception of petrol stations within the state capitals, most petrol outlets sold the product above government approved N145 per litre as at December 2016, when this investigation was carried out.A Petrol Price Watch report released midJanuary 2017 by the National Bureau of Statistics (NBS) corroborated the Daily Trust findings that petrol was more expensive in the Niger Delta than other regions.

The NBS reported that in December 2016, apart from residents of Akwa Ibom State who bought fuel at N144 per litre, no state in the Niger Delta bought petrol below N145 per litre.

The report indicated that petrol sold in Cross Rivers, Bayelsa, and Edo States in December 2016 at an average of N149, N152 and N146 per litre while the product sold at N145 in both Delta and Rivers States.

Our reporter observed during the visit to the oil communities that while fuel sold at about the approved official price in both Yenagoa and Calabar, the product sold between N180 to N230 in riverine communities such as Brass, Ekerimor and Nembe.

Mostly sold in black markets due to absence of conventional pump stations, petrol traded at N230 in Brass.

Our reporter observed that most road-side petrol stations between Ugep, a community located about 100 kilometres away from Calabar, through Ndealiche and Ikot Omin, up to Calabar, were either abandoned or not selling petrol on December 20, 2016.

Businesses of black marketers boomed along that axis with residents paying above the N145 approved by the federal government.

On why petrol is costly in oil-rich South-South than other regions, investigation showed that imported fuel transported to the region hardly get to water-locked areas and local retailers sell the product from illegal refineries to consumers at prices above government approved cap.

Findings showed that even when imported petrol from Lagos to the South-South gets to riverine communities, the product is eventually sold to consumers at high rates due to multiple handling and additional costs incurred by marketers which are not covered by bridging claims.

The Petroleum Equalisation Fund (PEF) was initiated by the federal government to solve disparity in petrol prices across the country by paying bridging claims incurred by marketers transporting petrol in trucks to different parts of the country.

A truck driver, Peter Ezejiegu, told the Daily Trust on Sunday that bridging claims are done from depot to depot basis and once the fuel is offloaded in state capitals, in this case Yenagoa, Calabar, Delta or even Port Harcourt, marketers have to bear the additional cost of transporting the product to other parts of the states.

Ezejiegu said petrol bridged from Lagos must first be transported to Port Harcourt before being moved to region’s capitals and this is the only cost covered by the federal government’s bridging scheme.

The investigation showed that in Bayelsa, petrol that gets to Southern Ijaw, Ekeremor Local Government and most creeks in Nembe are transported by boats at high cost which is not bridged.

It also found that illegal refinery operators targeted the huge market in riverine communities not sufficiently served by imported products.

Loco Chukwuma, who served in Brass during his National Youth Service, narrated how he worked part-time in one of the illegal refineries and earned N5, 000 per night.

Chukwuma said operators of illegal refineries spent huge sums of money on staff, security and general operations, hence the high cost of the finished product.

“We worked mostly in the night because of fear of security agents. By morning, we would have distributed it in communities by boat,” he said.

From December 2014 to December 2016, the federal government reviewed price of petrol twice. Between December 2013 and December 2015, the federal government fixed the price at N87 per litre, which was reviewed downwards to N85 per litre in January 2016 and further reviewed upwards to N145 per litre in June 2016.

The NBS Petrol Price Watch data covering December 2014 to December 2015 showed that while the official price of petrol was N87 per litre nationwide, residents of Niger Delta bought the product at an average of N108 per litre, being the highest average price the product reportedly sold across all the regions.

Residents of Bayelsa and Cross Rivers States even paid higher than the region’s average price for the product at N127 and N113 per litre respectively.

Between January 2016 and June 2016 when petrol price was fixed at N85 per litre, residents of Niger Delta bought the product at an average price of N138, with residents of Bayelsa and Cross Rivers reportedly paying for the product for as much as N144 and N145 per litre.

An official of the Department of Petroleum Resources (DPR) in charge of Cross Rivers and Akwa Ibom States, Bassey Nkanga, admitted that fuel used to be more expensive in the Niger Delta than other regions of the country in the past, but added that the situation has changed.

The DPR is a federal government agency which has the statutory responsibility of ensuring compliance to petroleum laws, regulations and guidelines in the Oil and Gas Industry, including monitoring pump stations, retail outlets, and any other locations where petroleum is either stored or sold.

“I can tell you authoritatively that it was in those days, not now,” Nkanga, who was once in charge of Yenagoa, told Daily Trust on Sunday. He said before Charismas in 2016 and a week after Christmas in 2017, many petrol stations sold fuel at N142 per litre, about N3 lower than the N145 official price fixed by the federal government.

“That’s what you find in so many places. I cover Cross Rivers and Akwa Ibom and as I talk to you now, averagely, 95 per cent of the stations are selling within the range stipulated at N145 per litre but in so many areas, especially in the urban areas, a lot of marketers are selling below N145, that is between 142 and N145 per litre,” he said.

He said since DPR’s zonal office was located in Port Harcourt, he observed that fuel sold below N145 in Rivers State.

“As we move, we also observe the same trend,” he said on fuel price across Rivers, Akwa Ibom and Cross Rivers State.

Nkanga’s statement contradicted NBS’s report, residents’ responses and field observation by the reporter.

The General Manager of Corporate Services Department at the Petroleum Equalisation Fund (Management) Board, Dr. Goddy Nnadi, admitted that uniform pricing has been a challenge in riverine communities of the Niger-Delta.

He said PEF had set up a special committee on bridging claims for riverine communities and that the high price of petrol in those communities would be addressed once the committee swung into action.

Comparatively, findings showed that in the United States, government does not subsidize transportation costs of petrol across the country as seen in Nigeria’s petroleum equalisation fund scheme.

Closest destinations to refineries in Texas, Oklahoma and Mississippi benefit more from cheaper prices of petrol since the country does not import refined petroleum products and does not have an equalisation policy.

For instance, petrol sells at a higher price in Chicago than in Mississippi, because the former is about 2000 miles away from the refinery while the latter hosts the refinery.

However, petrol is transported to far communities through pipelines, making the difference in price across the country insignificant.

In Nigeria, pipeline vandalism has made it impossible to move petrol across the country with ease, eliminating high cost of transportation by trunks and narrowing the price gap.

A two-year analysis showed that between December 2014 to December 2016, residents of the Niger Delta bought petrol at an average price of N119.91 per litre, which is about N9 greater than the average of N111 per litre paid by residents of the South West over the same period.

During the same period, residents of the North West bought petrol at an average price of N114.10 per litre while residents of North Central bought the product at an average price of N118.88 per litre.

Analysis showed that residents of North East and South East bought petrol during the period at average prices of N119.34 and N119.51 per litre respectively.

A Professor of Development Economics at the University of Uyo, Leo Ukpong, advised the federal government to completely deregulate the oil sector and remove all forms of subsidy on petrol, including bridging claims.

Ukpong said there was no point trying to achieve uniform price for petrol across the country as it was not achievable.

He said “it made no sense” equalising petrol price across distant land locations without doing same for distant riverine communities.

“It is a discriminatory policy against the Niger Delta and if it was the reverse, that will not happen. Bayelsa, Cross Rivers, Akwa Ibom and Delta are coastal states and ships can come in from there since we are importing petrol. Fuel should be definitely cheaper there,” Professor Ukpong said.

He said once the industry is completely deregulated, the Niger Delta region stands a chance of buying petrol at a cheaper rate due to its proximity to Port Harcourt and Warri refineries and the possibility of more refineries being built in the region.