Petrol: Let’s bite the bullet

 When the Department of State Security (DSS) early last December issued a 48-hour ultimatum to downstream petroleum sector operators to normalise fuel supply to the public, it apparently thought they had a handle on what it takes to do just that. Indications have shown, however, that they didn’t; and whereas they postured as if what DSS said was doable, the situation is far more complicated. And so, eight weeks after the ultimatum, product scarcity persists. 

The secret police suspected the persistent scarcity of premium motor spirit across the country was an invidious orchestration and only stopped short of shouting, ‘Sabotage!’ It called industry stakeholders including the Nigerian National Petroleum Company (NNPC) Limited, Independent Petroleum Marketers Association of Nigeria (IPMAN), Major Oil Marketers Association of Nigeria (MOMAN), Depots and Petroleum Marketers Association of Nigeria (DAPMAN), Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), Petroleum Tanker Drivers (PTD) as well as transport unions’ officials to a meeting and gave marching orders to urgently sort it out. Product was not only scarce, spawning long queues of desperate users at fuel stations; where available, it sold at between N250 and N350 per litre in most places as against N165 per litre approved by government. “The DSS called the meeting because of the security implications that may arise from this trend, and we say enough is enough! Whatever the hurdles, the trend must be resolved. We will not continue to tolerate fuel scarcity,” DSS spokesman Peter Afunanya recalled  of the department’s deliberations with industry operators. He added inter alia: “We are not saying it is sabotage. But if it comes to economic sabotage, we will rise to the occasion. At the meeting, everybody was frank. NNPCL stated that there is sufficiency of fuel. But why the scarcity?”

There you have the million-dollar question: why the scarcity? And it persists till date! NNPCL always said it had more than sufficient stock available. Taken at its word, it’s like the proverbial ‘water, water everywhere but none to drink.’ Nigerians can’t get petrol to buy readily at dispensing stations, far less so at government-approved price that it says is being subsidised. Only a couple of weeks ago, Finance Minister Zainab Ahmed made known that the Federal Government earmarked some N3.6trillion in the 2023 budget for fuel subsidy till June. When reports emerged lately that government had approved an increase in fuel price, Petroleum Resources Minister of State Timipre Sylva insisted there was no such thing. “There is no reason for President Muhammadu Buhari to renege on his earlier promise not to approve any increase in the price of premium motor spirit (PMS) at this time,” he was reported saying, stressing that the president remained sensitive to Nigerians’ plight, understands their challenges and would not want to cause them untold hardship.

But it remains to be seen how political soft-pawing addresses the issues at stake. Nigeria imports the petrol she consumes nearly wholesale, and that invariably involves quantum foreign exchange. Since it is NNPCL that has access to foreign exchange at the official rate of N452 / dollar, it monopolises importation of the product. Even then, NNPCL doesn’t have control over other logistical factors involved in getting petrol to consumers. And while it insists there is ample stock of product available, it also acknowledges distribution challenges faced by marketers. Lately, NNPCL Group Managing Director Mele Kyari cited differentials in pump-head prices as one reason petrol is scarce in some places while available elsewhere. “We do not have a supply problem, we have a distribution challenge – distribution challenge that is coming as a result of price differentials. People take products from areas where prices are low to where prices are high and you see that spike in areas where prices are low,” he said in Port Harcourt when Petroleum Minister of State Sylva visited armed forces formations in connection with ongoing fight against oil theft. He granted though that “pricing today is a very serious challenge and we’re working with partners and marketing companies that balancing can come…” Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) Chief Executive Farouk Ahmed, who spoke on the same occasion, was more specific: “Supply is not the problem, what we have as problem is distribution. This concerns marine movement, where marketers have to charter vessels to move products from offshore level. Secondly is the issue of naira’s depreciation; when we see improvement in revenue generation, maybe that will help the naira to stabilise. It’s all intertwined.”

“Petrol importation for domestic consumption is the  bane of supply and only local refining can solve that problem”

To better understand what Ahmed was talking about, you perhaps need to hear from MOMAN, which early last week blamed the lingering scarcity on factors beyond its members’ control amid high product demand. In a statement, the association said: “The major cause is the shortage and high (US dollar) cost of daughter vessels for ferrying product from mother vessels to depots along the coast. Next is the inadequate number of trucks to meet the demand to deliver products from depots to filling stations nationwide.” Meanwhile, independent marketers warned that the scarcity could persist till June in view of national dependence on importation. IPMAN spokesman Ukadike Chinedu was reported saying: “This issue of subsidy and the importation of petroleum products are major reasons we are suffering like this and having epileptic supply of PMS. This may drag till the current administration leaves in May or till June, this year. The exchange rate is affecting fuel imports, which is also why the costs of petroleum products are high. We use too much naira to chase the few dollars that are available. So, the solution is for us to refine our crude here and get our depots working.” Chinedu added that product scarcity at periods of transition is to be expected in a command economy that the subsidy regime represents. “This is because suppliers will be very wary of selling petroleum products so that their debts will not be carried over to the next administration. Successive governments have suffered this epileptic distribution of petroleum products during transition to a new government,” he said.

Much as NNPCL claimed it had substantial stock of imported product, marketers argued that they couldn’t get enough to sell. Among them, DAPMAN’s Adewole Olufemi said: “Until and unless the queues are completely eliminated, we’ll require more volume than usual.” Petroleum Retail Outlet Owners Association of Nigeria president, Billy Gillis-Harry, also cited unavailability of petrol for marketers to sell as the issue of concern. “Let there be products to sell… Once that problem is sorted out, others shall be addressed too,” he said. As it were, between NNPCL’s touted available stock and filling stations where the product should be dispensed to the public, there is a ‘black hole’ constituted by logistical challenges to which neither NNPCL nor marketers have ready answers. Bottom line: product remains scarce at dispensing points; and for product that makes it through the ‘black hole,’ prices defy government fixture because marketers apparently factor in recovery costs. Last week, government took another shot at redress by raising a 14-member panel headed by President Buhari, and with Petroleum Minister of State Sylva as alternate chair. The terms of reference of that panel, in my view, looked like what should have been in place seven years ago, not now barely four months to tenure expiration. We should know shortly from the fuel supply situation how much of practical effect – as opposed to mere grandstanding – the panel packs.

But the real issues are as follows. Petrol importation for domestic consumption is the  bane of supply and only local refining can solve that problem. Damn the political capital, regulation of pump-head price is sheer waste of time and subsidy is willful squandering of national wealth: a sizeable N3.6trillion is voted to be spent up to June whereas Nigerians aren’t getting the product to buy at the price being subsidised. Government always touted deregulation as the panacea, but without meeting up to a pre-condition of domestic refining. My take is: let’s bite the bullet! Deregulate now, and save the subsidy. You can bet, of course, that living standards will get horrendous with fuel deregulation anchored on importation. The fate of diesel shows petrol could rise to N800 per litre when deregulated; unlike diesel, though, petrol has pervasive usage and would have monstrous inflationary effects. But that might be the catalyst needed for domestic refining, as it is unlikely government would sit idly by with ruination that will be brought on citizens under its watch. In other words, things may have to get worse to get better. Let’s go to Ground Zero and build up.