By Ayobami Adedinni
In 2015, when President Muhammadu Buhari emerged the President of Nigeria, fuel scarcity became a thing of history for over 30 months.
However, in November 2017, failure to deliver premium motor spirit by Direct sales and direct purchase ( DSDP) of crude oil contractors resulted in the supply gap which till January 2018 remains an unresolved challenge for both the Executive and legislative arms of the federal government.
For instance, at a stakeholders public hearing meeting conducted by the Senate Committee on Petroleum ( Downstream), the Chairman Senator Kabir Marafa ( APC Zamfara) who chaired the session said there is massive fraud in the country’s Petroleum sector while lashing at the stakeholders.
Specifically, Marafa alleged that the NNPC and the oil marketers defrauded the country of N1.1tr this year.
“When we asked them Nigerian National Petroleum Corporation (NNPC), they told us, that they are importing 30 cargoes of 37,000 metric per tonne ( MT) per month through the DSDP contract. If you compute it at 1, 341 per MT by 37,000, you will have N1.488 billion monthly.
“Assuming we consume 40m litres per day, we will have seven days left in each month and if you multiply it by 12 you will have supply of 84 days left,” he said.
The stakeholders meeting was a follow up to the nationwide fuel crisis which made it impossible for Nigerians to celebrate Yuletide peacefully.
While some Nigerians spent hours on long queues at various filling stations for fuel needed for traveling to their hometowns, others decided to stay back at their various places of work as a result of high transport fares charged by few commercial vehicles that obtained fuel at prices that range between N250 and N400 per litre.
The blame game and drama displayed by marketers under the umbrella of the Major Oil Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association ( DAPPMA) and the Independent Petroleum Marketers Association of Nigeria ( IPMAN) appeared as intrigue and deceit designed as a strategy according to stakeholders to implement full deregulation in the nearest future.
The argument was based on the rising cost of crude oil in the international market which made the landing cost of Premium Motor Spirit (PMS) higher than the depot price and the pump price.
Policy initiative
The announcement of a dual fuel price policy by the Minister of State for Petroleum Ibe Kachikwu was a direct acceptance of the shortcoming by the federal government for one-month crisis that paralyzed economic activities nationwide.
Under the arrangement, NNPC would sell at N145 per litre while independent marketers would import and dispense at their own rate.
Minister of State for Petroleum Resources, Dr. Ibe Kachikwu who said this when he appeared before the Senate Committee on Petroleum Downstream also said that the current scarcity might remain till June 2019, when government-owned and private refineries would fully come on stream.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu outlined three conditions. The first condition has to do with regulation and the next is for the NNPC to sell at a given rate to marketers who will now add their margins, while the third is through forex (foreign exchange).
“So if the government can give forex to marketers, then automatically marketers can be able to sell at the rate of N145/litre.
“So whether the template is reviewed or not, one major factor is the issue of forex. Currently, the dollar is about N365 and if the government can make it available to marketers at a rate of about N250, then marketers will be able to sell the product at the rate of N145/litre when they import.”
However, Marketers said they will only import Premium Motor Spirit (PMS), popularly known as petrol, if the rate of forex is suitable enough to encourage the importation of the commodity, despite the ongoing review of template by the Federal Government.
Kachikwu got the support of the chairman of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMA), Mr. Dapo Abiodun who said to maintain the N145 approved pump price, government should make dollar available to them at N240.
Major Oil Marketers Association Of Nigeria (MOMAN) secretary reacted to the dual pricing saying, Dual or multiple pricing of the same commodity in the same economy? We should do more consultation. We have practised dual pricing for petrol before and it didn’t work.
Recently report shows that DAPPMA members import about 65 percent of the nation’s total fuel consumption and MOMAN imports about 15 percent and PPMC/NNPC imports the balance of 20 percent. Out of nearly 130 fuel depots in the country, IPMAN, MOMAN and NNPC own them in the ratio of 83:24:22 respectively.
There are about 26,700 filling stations nationwide, with 2,453 stations belonging to the MOMAN, comprising Mobil Oil, Total, Oando, Conoil, Forte Oil and MRS. NNPC has only 37 mega stations located only in the capital cities in the 36 states of the federation and the federal capital territory. Independent Petroleum Marketers Association of Nigeria has over 24,226 outlets located in the country’s hinterland.
Implications
Excluding the independent and major marketers in the fuel supply programme provides a willing tool to idle marketers with capacities larger than NNPC’s to sabotage the fuel supply efforts.
Even if they choose not to sabotage the process intentionally, NNPC simply does not have the filling stations and local intelligence to send fuel to every creek and street corners in the 774 Local Government Areas in Nigeria.
NUPENG chairman South West Nojeem Korodo argued “ There is hidden agenda on that and it will be too suicidal for the nation because who will patronize high price and for how long can NNPC sustain this? Let’s call a spade a spade, if they want to hike the price, they should be bold enough to tell Nigerians because this hide and seek game takes us no where”
The National Vice President, Independent Petroleum Marketers Association of Nigeria, Abubakar Maigandi, said that it was possible to review the pricing template for PMS and retain the cost of the commodity at N145/litre.
He said, he was of the hope that in the next 18 months, our refineries will be in order, because that is what the minister said recently. He also said we are expecting other refineries to come on stream which are the Dangote refinery and other modular refineries.
He added that marketers cannot import petrol because of the cost of the commodity in the international market and the high forex rate.
“So, we are expecting government to tell which of the listed conditions it will adopt so that this fuel crisis will end once and for all.”
However, NNPC on Saturday stated that the pump price of petrol was N143/litre in NNPC retail outlets and pump price will be N145/litre in other filling stations, while PMS ex-depot price of N133.28k per litre to marketers was still being maintained.
Effects
An increment in the pump price in the country this year will spike the price of commodities, increase transportation cost and in overall adversely impact the socio-economic landscape.
This, according to analysts will erode the confidence of the electorate in the Re-election of All Progressive Congress ( APC) candidates at both the state and national levels 12 months to the elections.
Who will patronize high price when NNPC is selling at a lower price.
Political consideration
It is pertinent to note that the 18-month Emergency Period to Address Pricing beginning from January, 2018 will elapse on the month of August, 2019. This is an indication that considering the pre-election year, political consideration may have come to play over market consideration.
The Dual fuel pricing will create a lot of billioniares in the country in the sense that if I am having a filling station branded NNPC and another filling station in my Name, I can easily collect PMS from NNPC and divert it to my own Private filling station and sell it above N145 per litre.
Solution
Nigeria’s fuel scarcity problem will probably be manageable if anyone actually knows total volume of PMS in demand is used in the country.
The NNPC could always make plans ahead of time for replenishing shortages in supply before scarcity ensues. So why is that such a big deal?
Well, the estimate of national demand is between 35 and 40 million litres. However, marketers, when calculating subsidy claims for products, put it to the NNPC and PPPRA that the figure is between 45 and 60 million litres.
A lasting solution is to have local refineries and when the refineries led by Dangote refinery resume operation, solving fuel scarcity will still require great attention to ensure easy flow of products from the refineries to parts of the country through pipelines.
Conclusion
The Nigerian government and stakeholders must give top priority to revamping the moribund refineries in the country and encourage establishment of new refineries through incentives, fast-tracking of approvals and full deregulation of the downstream sector of the petroleum industry.
