Last October, there was a warning that went unheeded. Nigerians were facing an acute fuel crisis which signposted a bleak Christmas, New Year and uncertain 2023. This was because shipowners were threatening to stop rendering services to the Nigerian National Petroleum Company Limited (NNPC) over the non-payment of about $90m owed for their chartered services, which had accumulated over the previous nine months. A former President of the Nigerian Indigenous ShipOwners Association, Aminu Umar, warned that if the issue was not addressed in the coming weeks, the current petrol supply hitches might be compounded as members would not be able to fulfill their obligations. Umar also stated that if workers decided to stop because they were not being paid, it would affect the movement of cargoes, resulting in an increase of the already existing scarcity.
Similarly, President of the ShipOwners Association of Nigeria (SOAN), McGeorge Onyung, urged the NNPCL to try and pay up the ship owners to enable them to go back to work. Onyung explained that the NNPCL contacted ship owners to provide Nigerian ships for coastal shipping, but after almost nine months of working for the oil giant, ship owners were still waiting to be paid.
Oil marketers and petroleum experts at the time warned Nigerians to brace for a nationwide scarcity of petrol if the shipowners carried out the threat to withdraw their services. This, they said, would eventually lead to an economic crisis, as the transportation sector would grind to a halt if the supply of petrol ceased. However, the Major Oil Marketers Association of Nigeria (MOMAN) started working with the NNPCL to improve the distribution of petrol nationwide.
By November, with the petrol shortage worsening, reports claimed that it was caused by illegal practices, such as arbitrary pricing and diversion to unauthorised locations. Some independent oil marketers, who are unhappy with the high cost of lifting the product at depots, are instead taking the product to places where they can get higher returns. This was due to the shortage and the high demand for the product, as some companies and other corporate users are willing to pay more, literally fuelling the diversion of the product by some marketers.
By December, Nigerians were facing major problems with both transportation and procuring foodstuffs for the holiday season. The scarcity caused a significant increase in transportation fares, food and services and left many stranded. Many Nigerians who typically travel to different parts of the country to celebrate Christmas and the New Year, were unable to do so with the high fares occasioned by the scarcity. Transportation companies milked the situation as they imposed a 100 percent increase in fares, blaming the hike on the shortage. The scarcity also caused difficulties for households and commercial motorists, with prices increasing beyond the reach of many workers and residents.
The Federal Government and fuel marketers offered different explanations for the fuel crisis. The NNPCL stated that the scarcity was due to ongoing road infrastructure projects around Apapa and access road challenges in some parts of depots in Lagos. Meanwhile, the national operations controller of the Independent Petroleum Marketers Association of Nigeria (IPMAN) attributed the scarcity to unsteady supply in the past few weeks.
Despite these excuses for the unavailability of petrol, the root cause is the NNPCL’s lack of capacity to refine crude oil locally despite pumping billions of dollars towards repairs of its four moribund refineries. After many years of ease of doing business under civil rule and democratic practice, none of these refineries have been fixed and the country still depends completely on the foreign refining of crude oil. This fixation on importing refined products, which continues to enrich a few, is at the very basis of incessant scarcities, the continuation of the fraudulent subsidy regime and the reason Nigeria does not benefit from price increases of crude.
In an apparent belated effort to boost local production of refined products and permanently halt the subsidy regime, President Muhammadu Buhari signed an agreement with Daewoo Group of South Korea to revamp the 110, 000bpd Kaduna refinery, with the goal of delivering refined products before the first half of 2023. Is this target still achievable? We’ll see. The Dangote Refinery is also expected to start fuel production sometime in the year. Frankly, I don’t know for sure if we can achieve sufficiency in petrol refining this year. That is my honest truth. What is however factual is that the fuel scarcity will not abate anytime soon and with four months to the end of this administration, Nigerians are once again victims of a brutal and crushing fuel shortage.
Less than a month to the presidential election and many months since the warnings of experts, Nigerians have resorted to buying fuel from black market operators at exorbitant prices. This has led to an increase in the number of illegal pump prices at fuel stations, where fuel is sold at prices as high as N600 per litre, against the N185 per litre regulated price.
Expectedly, most Nigerians are blaming the federal government for the fuel crisis. Even the presidential candidate of the ruling All Progressives Congress (APC), Asiwaju Bola Ahmed Tinubu has blamed the scarcity on elements within the government trying to frustrate his presidential bid.
There have been suggestions to mitigate the effects of the scarcity from different quarters. The oil marketers have called for an end to the NNPCL’s monopoly on petrol imports. The General Manager of Operations for TotalEnergies Marketing Nigeria Limited, Abdulmutalib Rabiu, stated that the government should allow competition by granting licenses and access to foreign exchange to marketers who want to import products. The Chairman of the Major Oil Marketers Association of Nigeria (MOMAN), Olumide Adeosun, added that there were sufficient products in the country, but the problem was a lack of investment in infrastructure to guarantee fast and smooth distribution. The Secretary and CEO of MOMAN, Clement Usong, suggested that full deregulation of the petroleum downstream sector should be implemented in phases to ease the effects of rising Premium Motor Spirit prices.
As the fuel crisis persists, what is abundantly obvious is that whoever wins the presidential election will have to contend with the issue of subsidy, which is currently draining the purse of the nation, despite being inefficient. By artificially making up for the shortfall between the international fluctuating price of petroleum products and the government-enforced fixed price of the commodity, which is the raison d’être of the grift that is the subsidy regime, the current administration and its predecessors have annually frittered away a ridiculous amount – $15.7 billion in 2022, for instance. One can only imagine the difference that could have been made in the economy were the money injected into capital projects and the funding of education, technological development and innovative projects.
In the months since the shortages began, the fuel crisis continued to be a major concern for Nigerians, with many blaming the government for not taking adequate steps to address the issue. The federal government must immediately commit to completely hands-off the determination of prices for petroleum products and allow market forces drive costs of these products. This is the free market economy that moves the capitalist system we operate as a democracy and has clearly worked efficiently for other commodities and even diesel.
The subsidy regime continues to be responsible for a large volume of petroleum products being smuggled out of the country, which is compounding the scarcity in Nigeria. Millions of litres of petrol are smuggled to neighbouring West African countries where they are sold at market price.
To stem the tide of the scarcity, the Federal Government approved a 14-member committee to track fuel availability, an agenda that has been on since the President Muhammadu Buhari government came to power eight years ago. The committee is tasked with bringing a lasting solution to the disruptions in the supply and distribution of petroleum products in the country. Yet, instead of doing what ought to be done, the Minister of State for Petroleum Resources, Timipre Sylva, has directed the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to ensure strict compliance with government-approved prices for PMS and to ensure that the NNPC meets the domestic supply obligation for PMS and other petroleum products. He also directed the protection of consumers from price exploitation on other deregulated products such as AGO, DPK, and LPG.
The fact is that, no matter how many committees get involved, until the regime of subsidy is extricated from the industry and the forces of demand and supply are allowed to determine the prices of petroleum products, we will continue this pitiful cycle and all the attendant suffering that are part and parcel of the problem. The will to make it happen appears to be what is lacking. As President Buhari has reneged from making it happen in his second term that is on its last legs, it behoves the next President to make it happen and put this sordid annual chapter of our continued existence behind us for good.