Blackmailers at work?

Nigerians, effectively without buffer, were steamrollered in an acute pang of fuel drought nationwide that spanned the recent Yuletide and New Year crossover seasons. And it was all down to idle shenanigans of invidious blackmailers. What cheek! Meek shoals paddling in shark-infested waters couldn’t have fared much worse.

Most citizens spent much of what should have been a restfully festive period in rabid hunt for gasoline at dispensing stations that did anything but dispense the essential item – notably, including outlets owned by the state oil pot, the Nigerian National Petroleum Corporation (NNPC). Not a few persons had to abandon the indulgencies of the season in endless wakes for nocturnal vending of fuel at outrageous tariffs they could ill-afford, but were nonetheless compelled to for basic existentials. Now we have it on privileged insight that the ordeal all derived from “some of our compatriots (who) chose this period to inflict severe hardship on us all by creating unnecessary fuel scarcity across the country.” Really!

President Muhammadu Buhari, in his New Year Address early last week, deplored the impudence, vowing to “get to the root of this collective blackmail of all Nigerians and ensure that whichever groups are behind this manipulated hardship will be prevented from doing so again.”

Prior to the presidential address, recrimination raged between NNPC and fuel marketers on who takes the rap for the persisting scarcity. The state firm accused marketers of holing-in or diverting their supplies instead of dispensing stuff to the public. The marketers, in turn, insisted their tanks were empty owing to inadequate feedstock from NNPC, which had since October 2017 become the sole importer of petroleum products.

Some costlines were thrown in to push the respective narrative. NNPC berated marketers for cutting out of importation and called out members of one of the unions, the Depot and Petroleum Products Marketers Association (DAPPMA), as owing some N2.7billion in payment arrears to its subsidiary, the Petroleum Products Marketing Company (PPMC). The group, for its part, alleged advance payment by its members in excess of N90billion for product cargoes that NNPC had yet insufficient consignments to deliver.

But President Buhari in his New Year Address headed up, impliedly, with the verdict that marketers contrived the crisis – and that, for a cheap motive as blackmail – “given that NNPC had taken measures to ensure availability at all depots.”

True, you only need look at Nigerian marketers in drought seasons for the quintessential Shylock at work, if you wanted to see one. Even among that species, fuel marketers hold a luminous frontguard. Most of them habitually hoard products at the flimsiest expectation of official price increase, which they jump the gun to implement anyway through nocturnal vending to a desperate public at rip-off rates.

But the New Year verdict by Mr. President, who happens to be the substantive petroleum minister, just didn’t seem to address all matters arising. It did not explain, for instance, why most NNPC outlets, just like other marketers, lacked fuel to dispense to harried motorists at the height of the scarcity. Neither did it clarify the economics of long-term product availability at the official price cap of N145 per litre, even when NNPC Group Managing Director Maikanti Baru had said the prevailing landing cost was N171.40/litre.

‘The president’s verdict that marketers alone were to blame (for the fuel crisis) was too dismissive and, indeed, cavalier’

We must make haste to admit that the intricacies of official fuel-pricing template do get arcane for sideliners. Still, some basic elements of the mix simply don’t add up in the present circumstance.

It is trite, for instance, that domestic consumption of fuel in our country is fed nearly wholesale with imports because local refineries have perennially failed to make substantial input despite pledges by successive administrations, including the incumbent, to effect drastic turnaround. Marketers jointly accounted for some 60 percent of those imports while NNPC supplied the outstanding, until when they cut out owing to adverse headwinds.

DAPPMA helmsman, Dapo Abiodun, last week articulated the marketers’ stance. “In the past, marketers brought in about 60 percent while NNPC brought 35 to 40 percent. But by the month of October, marketers completely stopped importing because there was no more subsidy. We couldn’t sell for profit, and we had to stop importing. The burden for 100 percent importation now fell on NNPC,” he said.

Common logic is that this turn must have foisted a supply gap that NNPC must be hard pressed to bridge. But the state firm insisted it was doing quite fine. Baru told journalists penultimate weekend: “We have sufficient products that will last us for the next 30 days and we keep bringing in 50 percent over and above our normal consumption into the country. And vessels have been lined up.”

Marketers, however, argued otherwise. “You can imagine a situation where NNPC was importing in part and marketers were importing in part, and suddenly NNPC begins to import 100 percent,” Abiodun said. He didn’t rule out incidents of product diversion to neighbouring countries where fuel officially sells at much higher rates than in Nigeria, though, and that is not counting other factors like panic buying that typically characterises times of scarcity.

Field oversight by legislators suggested that neither NNPC nor the marketers come clean of complicity for the fuel drought. Speaking early last week, Senate petroleum downstream committee chairman, Kabiru Marafa, said: “We visited NNPC zonal depot in Gusau to find out the quantity of fuel supplied to the depot and we noticed short supply of the commodity…We question the NNPC on this issue, because (Baru) said they had doubled the quantity of daily supplies of the product, but it is not available to the public. Another unfortunate thing is the attitude of filling station owners who sell this commodity to the public: they are involved in one or two malpractices. In fact, out of all the filling stations we visited, only two have complied with government directives…”

My take here is: the president’s verdict that marketers alone were to blame was too dismissive and, indeed, cavalier. You can’t foreclose, of course, that he had privileged information to inform that verdict. But it could also well be he has been listening only to a one-sided narrative – that of NNPC. Regrettably, such does not offer much hope of government addressing the fundamentals of the recurrent crisis. Supply shortfall regarding any item invariably serves as nursery for sharp practices in its dispensing. If you do not ensure unbroken adequate supply, you would never be able to staunch the sharp practices.

Then, we need ask about the economics of long-term viability of the present pumphead price. Baru left it all in the political realm when he said: “The landing cost moves with the CIF (Cost, Insurance and Freight) price of PMS (petroleum motor spirit). As of Friday, the CIF price was in the neighbourhood of $620 per metric tonne. At the official exchange rate of N305 to the dollar, the landing cost should be N171.40 per litre…However, Mr. President has directed that we should maintain all the parameters to ensure that it is sold at N145/litre, and that is why we are selling at the depot at N133.28.”

2018 is an electioneering year and the Buhari administration, obviously, would be hard pressed to avoid risking the political cost of raising fuel price at this time. In any event, it is unlikely Nigerians would by any stretch of accommodation accept such increase with the prevailing standard of living. But the seeming alternatives are that we would have frequently recurring seizures in supply, or the economy would be monumentally mortgaged with “under-recovery costs” unless there is an economic (as opposed to political) design to the pricing template.