May 5, (THEWILL)- As Nigeria continues to rely solely on refined imported petroleum products, especially the Premium Motor Spirit (PMS), popularly known as petrol, there are strong indications that the recent fuel crisis that engulfed parts of Nigeria is a prelude to harder times ahead, while the oil sector grapples with a myriad of challenges.
These include dwindling investment outlay, divestment by the oil majors, high cost of production, low output, depleting foreign reserves, hidden subsidy payment and expensive moribund refineries among others.
After some period of “stability” the nation’s oil company, Nigerian National Petroleum Corporation Limited (NNPCL), experienced supply hitches that led to weeks of petrol scarcity in some parts of the country, especially the major cities where the product is in higher demand,
This pushed the citizens, households and businesses into further hardship that worsened an already tough situation. During the period, petrol sold for as high as N1,000 per litre in some areas leading to increase in transportation, high cost of goods and other services while some businesses had to shut down.
0il marketers had blamed the fresh scarcity of petrol on the lingering supply challenges from NNPCL, the sole oil supplier. According to the National President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Billy Gillis-Harr, the supply challenge has remained unresolved even though NNPCL continued to play down on it, blaming it on “logistics issues”.
“As for us, PETROAN members, we can tell Nigerians for real that if we have petroleum products delivered to us upon payment for those same products, we will supply to Nigerians,” Gillis-Harr said while featuring on a Channels News Television programme.
He added, “We do not have any reason not to serve the public and we are willing to serve the public. All that is required is for us to have petroleum products delivered to us from NNPC and we will make sure that our retail outlets are open, some of them are even open for 24 hours. The challenge of logistics is only relevant to the NNPC retail outlets.”
Some stakeholders and industry experts maintain that NNPCL was being economical with the truth regarding the cause of the scarcity which crops up from time to time during which they merely caution the public against indulging in “panic buying”.
Giving a deeper insight into the matter, the Independent Petroleum Marketers Association of Nigeria (IPMAN) explained that NNPC was having serious challenge sourcing petrol from European refineries which are currently undergoing scheduled maintenance.
The Public Relations Officer of IPMAN, Chinedu Ukadike, who revealed to Journalists that the product was currently unavailable in the country due to challenges in sourcing caused by ongoing maintenance at refineries in Europe, explained that the scarcity was expected to take around two weeks to resolve.
He said, “The situation is that there is no product. Once there is a lack of supply or inadequate supply, what you will see is scarcity and queues will emerge at filling stations.
“On the part of NNPCL, which is the sole supplier of petroleum products in Nigeria, they have attributed the challenge to logistics and vessel problems.
“Once there is a breach in the international supply chain, it will have an impact on domestic supply because we depend on imports. I also have it on good authority that most of the refineries in Europe are undergoing turnaround maintenance, so sourcing petroleum products has become a bit difficult.
“NNPC Group CEO has assured us that there will be improvement in the supply chain because their vessels are arriving. Once that is done, normalcy will return. This is because once the 30-day supply sufficiency is disrupted, it takes two to three months to restore it.”
Stakeholders maintain that as long as Nigeria’s domestic refineries remain dormant and the country depends entirely on imported petroleum products, the economy will be in a dire state.
An energy and financial expert, Bala Zaka, said Nigeria lacks the strong economic base to continue to rely on imported petroleum products to operate its domestic economy as it has negative impacts on the nation’s reserves while the moribund refineries remain idle yet consuming huge resources. He maintained that the removal of fuel subsidy was a grave error that would “consume the people”.
“Bad leadership is at the heart of our problem. Nigeria has been seriously misgoverned and the economy badly managed. They don’t want to tell Nigerians the truth: that the economy is in deep trouble and I wonder when and how it will recover.
“I said the only thing keeping the people going was petrol since the government cannot give them energy. If you remove subsidies, you will finish the people,” he said in a chat with THEWILL.
Bala lamented the exit of major oil companies from Nigeria due to hostile business environment which has led to a decline in investment in the oil and gas sector, thereby impacting the nation’s revenue outlay.
“You saw how the last government talked excitedly about the refineries, energy transformation … Where are the refineries today? What happened to the resources invested in fixing them?”, he asked.
But the “removed” petrol subsidy has returned. Industry key player and CEO of Rainoil Limited, Gabriel Ogbechie, disclosed recently that the federal government has resumed the payment of the controversial fuel subsidy following the devaluation of the naira in the foreign exchange market
Ogbechie who made this statement during the Stanbic IBTC Energy and Infrastructure Breakfast Session held in Lagos, pointed out that with Nigeria’s daily fuel usage at 40 million litres and the foreign exchange rate at N1,300, the government’s subsidy per litre of fuel falls between N400 and N500, culminating in a monthly total of approximately N600 billion.
Paying petrol subsidy while oil production is on decline and foreign exchange not favourable is a sure way of walking the tight rope, especially when the nation’s oil production is sliding and fuel importation constitutes a drain on the foreign reserves.
Industry experts observe that Nigeria’s high-cost oil industry is declining and that it will leave a gaping hole in exports and public finances, the Economist said in March.adding, “A chief economist at Shell once described Nigeria as the ‘jewel in the crown’ of the oil major’s empire. Yet in recent years the jewel has lost its lustre”.
THEWILL had reported that after several failed promises to get the facility working, it becomes necessary to ask what happened to the billions of Naira already expended in fixing the four refineries since 2015?
Nigeria’s four refineries in three locations – Port Harcourt (2), Warri and Kaduna – with a combined refining capacity of 650,000 barrels per day, are idle – the state they have been for about 15 years. Meanwhile, businesses and citizens are languishing in pains of hardship arising from high cost of fuel and deteriorating standard of living.
The precarious state of the economy which the moribund refineries contributed to, does not offer the desired spate of optimism to the citizens.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
