Why The Current Petrol Scarcity In Nigeria Will Persist Until, By Anayo M. Nwosu

The federal government lost one in a century opportunity to eliminate fuel scarcity in Nigeria on May 11, 2016 when the prices of petroleum products crashed, following a fall in the prices of crude oil.

Being that Nigeria imports virtually all the petrol we need, we are exposed to the shocks arising from the undulating prices of crude oil in the international commodities markets.

Petrol is derived chiefly from crude oil and Nigeria has a daily consumption need of between 30-35 million litres of petrol.

In May 2016 the Federal Government adjusted the ex-depot price for petrol which used to be N76.50 per litre to between a price band of N123.28 and N133.28 per litre.

Ex-depot price is the price a filling station owner  pays to supplier or NNPC to collect fuel at fuel depot and stock same in his filling stations and retail to consumers. Filling stations were asked not to sell petrol above N145 per litre to consumers.

At that time, government was making profit from being the sole importer of fuel. It employed Import Parity Principle which catered for landing cost of products, margins for the marketers, dealers, and transporters, jetty-depot through-put and other charges and taxes.

More importantly, at that time, there were no incentives for smugglers of fuel to the neighbouring countries like Chad, Niger, Cameroon and Mali as the margins disappeared because Nigerian fuel was no longer subsidized.

Sometime in 2016 when we were told that the refineries had started working based on careful turnaround maintenance and body language of the president, NNPC adopted a price modulation mechanism to determine the rate at which it sold petrol to off takers.

NNPC through its affiliate PPPRA determined ex-depot price by calculating the weighted average costs of refining and the cost of importing the balance of the petrol we could not produce at home.

The federal government also technically assumed the only importer of petrol due to the inability of the CBN to provide foreign exchange to licensed oil marketers to import and inability of the marketers to secure loans from bank. Noteworthy, is that the federal government  wouldn’t have to pay subsidy to anyone but itself.

The management of NNPC became creative.

They would arrange with refineries abroad and swapped crude oil for petrol to conserve foreign exchange. They also would buy petrol from international oil traders like Gencol, Trafigora etc. and pay them over a long period by which time NNPC would have sold products to the retail oil marketers and gather sales proceeds to pay internationaloil marketers .

Naturally, the negative cost arising from technical subsidy is netted off from crude oil sales and the balance credited to consolidated federal revenues account.

The losses NNPC has incurred since the rising prices of the crude oil above $44 per barrel and our failure to refine all our petrol needs are mind bugling.

The amount so far used to finance NNPC'S subsidy of fuel would be very useful to the opposition party for campaign in 2019.

The present crisis started when the international crude oil prices started inching up to above $45 per barrel and the further depreciation of the Naira.

The trouble has blown off control when oil prices started inching above $55 per barrel and there is no corresponding increase or regularity in local refining of fuel. This implies that government has to heavily subsidize the cost of importing fuel in order to maintain the pump price at N145 per litre.

And the smugglers returned.

Even when our refineries are made to produce at installed capacity and we continue to sell fuel at N145 per litre, our products shall continue to be a hot cake across the border to the good fortunes of our roguish civil servants, immune politicians and security officials at the Nigerian borders.

The mistake of changing very experienced supply chain managers at NNPC with people of that speak the same language and coupled with the fact that the new top line managers of NNPC, heads of the security agencies and the smugglers have some geography induced oneness has made it easier for uncanny unity in the underhand dealings and products diversion. It is a total clannish control of a national supply chain from beginning to the end.

Once the supply chain is broken by massive diversion of products outside the country, a supply gap is created and scarcity will happen. Like in any economic commodity trading, the natural characteristics like hoarding and profiteering shall ensue. And that is what is happening.

I feel sorry for the common man who buy the iniquitous propaganda that the cause of the scarcity is that owner of the filing station who manages to bribe his way to buy products at N170 per liter from NNPC/PPMC officials or their cohorts at the depots and sells at his station to recover his cost and make profit.

The problems are not with the filling stations.

The criminal civil servants and their politician cohorts smile to the bank while the hapless but equally complicit oil marketer is being hounded. He is at the lower end of the corruption chain.

The Department of Petroleum Resources (DPR) should rather visit the depots and ascertain how the tankers are loaded and the actual cost of buying a tanker of fuel. I have a feeling that they know the truth but need to be seen to be working. Some of them go home happy after each surveillance. They look forward to this day.

The solution to the scarcity is to flood the products at a rate higher than at which the products are smuggled. This will force the hoarders to start selling and normalcy would return.

It will take 5 days of 24 hours supply of about 45million liters per day to return normalcy. The industry operators know this for a fact.

But, the massive flooding of the market comes at a cost.

Huge huge huge cost!

The federal government is beset with the headache of raising funds to meet up with its 2017 budgeted obligations and the trouble of incremental fuel subsidy costs would be a double wahala which Igbo people refer to as “ila Mbajiaku ma obu ikwu udor”.

Make no mistake about it, and as usual, our dear president, who has all the powers to right this wrong just as he promised during his campaign, is not to blame. The former leaders before him, his cabinet members and his fellow gullible Nigerians are to blame.