Nigeria, which is reportedly Africa’s largest oil producer and one of the world’s largest exporters, has barely any refining capacity for the estimated 1.6 million barrels it produces daily.
Its refineries are in a moribund state, leaving the country with no choice but to export its crude oil and import refined petroleum products for daily use.
Subsidies, amounting to billions of naira, are paid to fuel importers to keep the country wet.
Too often, the dynamic is upset and fuel scarcity ensues every other year for decades and sometimes lasts for months.
Beginning from early February, another episode has been under way, causing endless frustration once again for Nigerians and any time it happens the authorities would find some reasons to blame the situation.
The early year shortage was blamed on the discovery of 100 million litres of imported petrol in the supply chain with “methanol quantities above Nigeria’s specifications,” leading to an emergency withdrawal of unnamed volumes of the product.
The consequences have been manifold and across the country, millions of people are spending hours daily on queues struggling for the meagre fuel in circulation.
At the end of the drama about 136 vehicle engines were reportedly damaged by the contaminated fuel in the first week of February alone.
In Nigeria, incessant hike in cost of petrol has been a major issue.
Looking back the cost of fuel pump increased from N87 per litre as of December 2015 to N165.77 by December 2021, showing an increase of 90.54 per cent.
This is according to the Fuel Pump Price Per Litre – Average (PMS) data from the Central Bank of Nigeria, CBN.
The Nigerian National Petroleum Company Limited, NNPCL, became the sole importer of petrol in Nigeria in 2016 after the federal government introduced the price modulation mechanism, which saw the pump price of the commodity rise.
A few months after hike review in May 2016, the value of crude oil in the international market soared, while the value of Nigeria’s currency, the naira, slid to almost N500/dollar, from about N197 to the dollar.
This unfortunately affected the landing cost of petrol, which rose steeply, and the country not willing to hike the pump price of the commodity again, soon returned to subsidising the product.
The NNPC said that fuel subsidy gulped N306.92billion in 2015 and in 2021, the NNPC said fuel subsidy gulped N1.43trillion, although there was no record for under-recovery in January, meaning that the cost of fuel subsidy rose by 365.92 per cent within the six-year period.
The NNPC called the subsidy payments under-recovery and deducted it from the proceeds of its domestic crude oil sales, before making remittances to the Federation Account.
The ensuing drama made the World Bank and the International Monetary Fund decry the continued spending by government on subsidy, urging an end the subsidy regime.
But then the Nigeria Labour Congress (NLC) and other pressure groups and trade unions had threatened nationwide protests against the planned and call for removal of the fuel subsidy.
Although the federal government had planned to eliminate the fuel subsidy by June 2022, the government backtracked on the plan and extended the subsidy regime by 18 months.
Also, the NNPC has said a total of N4tn from the federal government is required to fund the fuel subsidy in 2022, while data from the Corporation showed that fuel subsidy gulped N675.93billion in the first quarter of 2022.
According to the NNPC, fuel subsidy gulped N210.38billion, N219.78billion, and N245.77billion in January, February, and March 2022 respectively.
The president’s special adviser on media and publicity, Femi Adesina, earlier this year said Nigerians will have to pay a price to continue subsidising PMS, adding that the country might be left with no other choice but to continue borrowing to shoulder its fiscal overhead.
NATIONAL ECONOMY, peeping into history reports that five decades ago fuel was sold at 6Kobo in Nigeria.
It was in 1973 that Yakubu Gowon increased the price of fuel from 6Kobo to 8.45Kobo and in 1978 General Olusegun Obasanjo increased from 8.45Kobo to 15.3Kobo, while
President Shehu Shagari in 1982 increased from 15Kobo to 20Kobo.
In 1986 Ibrahim Badamosi Babangida increased from 20Kobo to 39.5Kobo, and again in 1988 he increased to 42Kobo, later from 42Kobo to 68Kobo, and thereafter he increased again in 1991 to 70Kobo.
Ernest Shonekan who spent 82days in office followed with an increase from 70kobo to N5.00.
In 1993 Sani Abacha decreased the price of fuel from N5 to N3.25k and later skyrocketed fuel pump price to N15.
Following public outcry, in 1994, he reduced it to N11 but 1998 Abdulsalam Abubakar increased it from N11 to N25, but later decreased to N20 in 1999.
In 2002 President Obasanjo increased from N20 to N50, but decreased in the same year to N22.
Again in 2002 he increased it to N26, and thereafter moved it to N42 in 2003.
In 2004 same Obasanjo increased it to N65 and left office in 2007 after increasing the pump price to N75.
But in 2007 Umaru Musa Yar’Adua reduced the pump price to N65, only for Goodluck Ebele Jonathan increased it to N141, in 2012 but later reduced to N97
As the people were not comfortable with N97, that same year Jonathan reduced it to N87 before leaving office 2015.
President Muhammadu Buhari came in and increased in 2016 to N141, from that time till date fuel price has been increasing surreptitiously without official public directive from N141 to N165 to above N200 a liter.
While the presidency and its agencies are denying any knowledge of fuel pump price increase in the country, most outlets are selling at above N200.
From petroleum marketers perspective, NATIONAL ECONOMY reports that Nigeria is unstoppably sliding into turbulent Christmas and new year.
Commuters and motorists in the nations commercial capital Lagos, are having difficult times in Lagos as long queues overstretched capacity of petroleum dispensing outlets mostly operated by major oil marketers.
NATIONAL ECONOMY, reports that independent marketers are gradually winding down operations following inability to access products given outrageous ex-depot prices.
President of Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr Prince Billy Harry has said that his members now access products at the cost of N190 and N113 per liter of petrol from private depot operators.
“Information reaching me in Abuja indicates that my members are buying petrol between N190 and N113 per liter. So the environment is no longer favourable and the competition favours the major marketers because the have the capital so what is happening is that our members would shut down until the major marketers exhaust their delivery to enable them sell.
“We cannot sell at the same price they sell because the structure in terms of delivery time tilts towards their favour. So the situation in Lagos is likely to continue and probably get bad except government intervenes,” Harry told our correspondent on phone.
He said the situation can get better if government considers credit sales to independent marketers and direct sales to members.
President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Okoronkwo, told our correspondent on phone that marketers can no longer carry the burden as he called on the Nigerian National Petroleum Company, Limited ( NNPCL), to restructure allocation and distribution pattern or the situation would escalate.
“We are calling on the NNPCL to separate the Independent Marketers from the major marketers and depot operators. We have five zones in the country. The NNPC should give us direct allocation at each zone.
“What I am advocating is direct allocation to Independent Marketers. We are not fairly treated and we cannot go to coastal areas to buy petrol at higher price and sell at the same price with the majors.
“Except this is addressed this situation being experienced will escalate. The NNPCL is bring the product so why deliver to depots who indiscriminately hike price. We control 80 per cent of the downstream market so if we are not given products the effect will be felt as it is happening today,” Okoronkwo said.
Further, Gillis-Harry stated that product unavailability and logistic challenges are some of the reasons for recurring fuel scarcity, especially in Abuja, Lagos, and other parts of the country.
The PETROAN president, however, attributed Lagos fuel scarcity to unavailability of the product at depots and also price disparity.
“As far as Lagos is concerned, if there is a scarcity or price issue in Lagos it is simply based on the fact that there are no products in the depots, that’s the reality,” he said.
On the hike in prices of petroleum products, he said, “Let me explain this to all of us, petroleum product pricing is supposed to be dynamic in the sense that if we bought from (Pipelines and Products Marketing Company Limited) PPMC depots at PPMC price, everybody is expected to sell in their retail outlets at N165.
“But if we had to buy from other depots who had bought from the PPMC and had to ship it and go through the necessary protocols of delivering it to the depots from where we have to take it, the price will be higher because the cost is dollarised, everything about petroleum products is dollarized that is just what is happening.”
His position reflects the concerns raised Oil Marketers Association of Nigeria which blamed charges in foreign exchange by the Nigerian Maritime Administration and Safety Agency (NIMASA) and the Nigerian Ports Authority (NPA) as creating disruption in market operations.
The Marketers have asked the agencies to obey Federal Government’s directive on Naira transactions for ports charges.
Mahmood Tukur, Vice Chairman II, Depots and Petroleum Products Marketers Association of Nigeria (DAPPMAN), stated this recently.
The federal gvernment through its downstream regulator, and based on agreement reached with stakeholders, directed ports charges to be collected in Naira.
The directives was contained in a communique issued in November 2021, and signed by heads of the Nigeria Midstream and Downstream Petroleum Regulation Authority, Nigeria National Petroleum Company Limited (NNPC Ltd), Major Oil Marketers Assocoation of Nigeria and DAPPMAN.
Tukur alleged that the agencies were yet to comply with directives and continue to collect charges in dollars.
“Government gave directives that these agencies should henceforth charge marketers in Naira, but that had not been implemented. That’s a major challenge.
“The dollar price is practically driven by demand, if there is no supply, obviously the price will rise. So, every time a vessel needs to berth, we have to pay ports charges in dollars.
“But we are saying that can be paid in Naira. That’s one way of actually taking demand (for dollars) out of the market and it will cool the FOREX effects.
“If these products are consume locally and destine for local ports, why is the NPA and NIMASA charging in dollars?
“They should simply implement a directive given by the government, and we can assure that this will also bring down the price of petroleum products,” Tukur said.
The statement also quoted the chairman of the DAPPMAN, Winifred Akpani as saying that FOREX conundrum was affecting petroleum marketers.
She noted that to charter a vessel that could convey 20,000 metric tonnes of PMS within Nigeria for 10 days, freight charges are being denominated in dollars.
“That comes to about N220 million at official FOREX rate of N440, and a whooping N440 million for petroleum marketers who have to source FOREX in the parallel market at N880.
“This implies an additional cost of N11 per litre for this transaction due to the FOREX official/parallel market differential.
“For this same transaction, Jetty fees, again charged in dollars, comes to N15.4 million at official FOREX rate and N30.8 million for petroleum marketers who source from the parallel market.
“In the same vein, Jetty Berth is charged in dollars and comes to N2.2 million at official FOREX rate and N4.4 million at parallel market.
“Then there are port dues (NPA and NIMASA) charged in dollars, which come to N71.51 million at official FOREX rate and N142.796 million for marketers who source FOREX from the parallel market,” she said.
Akpani described the trend as “quite burdensome” which made operational expenses and procurement increasingly difficult for its members.
She stated that amid this inclement situation, petroleum marketers compete unfavourably with the NNPC which has upper advantage.
She said the NNPC, historically, the supplier of last resort currently served as the major oil downstream company in the country with the acquisition of OVH.
“Without a level-playing field, especially one that guarantees access to dollars for all marketers at official rate, marketers’ ability to import products is continually and severely hampered.
“As a significant portion of their operations and critical operational and capital expenses are denominated in dollars.
“Full availability of products, particularly PMS will experience a marked boost when access is granted to FOREX at official rate for all operators and subsidies removed completely.”
Meanwhile, as the situation deteriorates in Lagos, attendants at filling stations charge motorists extra money to buy full tank at outlets.
Chinedu Ezeogu, a motorist who said he waited for about four hours to drive into one of the stations complained that the attendant demanded the sum of N500 if he would fill his tank.
According Ezeogu, attendants have begun to ration sales so as to accommodate others.
Petroleum products marketers on their own said pump price hike for petrol is with us officially or unofficially.
This is coming as black marketers now sell the product for as much as N300 to N400 a liter in major cities like Abuja, Calabar and Aba.
Billy Harry, said system inefficiency and scarcity of foreign exchange is about to create dysfunctional market operations that would bring about price distortion beyond the control of marketers.
Harry is not alone in this uncertainty as the National President of the Independent Petroleum Marketers Association of Nigeria, IPMAN, Elder Chinedu Okoronkwo sounded similar warning.
Both of them spoke to our Correspondent on phone while blaming independent depot operators as creating precarious market situation.
According to Okoronkwo, the depot operators unilaterally hiked ex-depot price of products in particular petrol.
“We independent marketers source products from these depots and they have refused to sell at regulated government price. What you observe in Lagos is simply a situation where marketers pay higher and then adjust their pump to recover cost and retain customers.
“They are not concerned about profit but to sustain their businesses until government takes a firm stand on deregulating the market “ said Okoronkwo.
Harry, on his part said with exchange rate above N800 a dollar, the public should expect another round of hike in pump price of petrol except exchange rate is stabilised.
According to him, landing cost of petrol to outlets is within the region of N184 to N189 per liter.
“We went round Abuja yesterday and we found out that a liter of petrol in the black market sells for between N350 to N400 a liter. On the other hand our retail outlets sell between N190 to N200 a liter depending on source of procurement.
“We monitor the situation in Calabar, Aba and Port Harcourt as well as Lagos. What we are doing presently is to ensure our members maintain reasonable price band. No one appear to be challenging the system but I want to warn that we may experience another round of price hike as we approach the festive season “ he said.
He warned that deregulation at this point will escalate the situation since the country relies on importation.
Okoronkwo on his part asked for the intervention of government as the ongoing crises is beyond what marketers can handle.
However, both of them said availability may be assured going by their conversation with the Nigerian National Petroleum Company, Limited, NNPCL, but cannot assure of price stability.
The Chairman, Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Dame Winifred Akpani, on her own is blaming acute shortage of foreign exchange (forex) in the official market as pushing the naira to N860 against a Dollar.
This according to her has broadly altered dynamics for the importation, distribution and marketing of petrol.
Akpani, who disclosed this during a press briefing by its Governing Council in Lagos, called on the government to give petroleum marketers access to foreign exchange at the official Central Bank of Nigeria (CBN) rate to enhance the supply and distribution of petrol across the nation this Yuletide season.
According to her, shortage of Forex coupled with several unauthorised levies, bad roads are among the factors making fuel importation and distribution burdensome for members.
Akpani, said the burden of sourcing forex through the paralell market for transactions domiciled in Nigeria had left petroleum marketers in “dire straits”.
“Accessing USD (dollars) for our operations has been an insurmountable hurdle for petroleum marketers. The difference between CBN exchange rate and the Parallel market exchange rate continues to get wider by the day,” she said.
Akpani noted that in addition to core operational expenses that are denominated in dollars, petroleum marketers also contend with sourcing funds from the parallel market to pay for fees and levies, some unauthorised, that are also charged in dollars.
“For exampe, to charter a vessel to convey 20,000 MT of PMS within Nigeria for 10 days, freight charges are denominated in dollars, that comes to about N220 million at official forex rate of N440 and a whooping N440 million for petroleum marketers who have to source forex from the parallel market at N880. This implies an additional cost of N11 per litre for this transaction due to the FX official/parallel market differential,” she said.
According to her, for the same transaction, Jetty fees, also charged in USD amount to N15.4 million at official forex rates and N30.8 million for petroleum marketers who source from the parallel market.
In addition, Jetty Berth is charged in dollars and comes to N2.2 million at official forex rate and N4.4 million at parallel market rate, while port dues, charged in dollars by the Nigerian Ports Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA), which are charged in dollars, come to N71.51 million at official FX rate and N142.796 million for marketers who source forex from the parallel market.
“DAPPMAN hereby calls on the government to establish a level playing field in the sector by giving petroleum marketers access to forex at the CBN exchange rate for their operations. This is a passionate appeal to the government as we can confidently state that accessing forex through the CBN window will significantly enhance capacity and facilitate seamless supply of PMS and birth a regime of sustainability in terms of storage, distribution, and supply across the nation,” she added.
The NNPCL, which historically served as the supplier of last resort, is now the major oil downstream company in Nigeria with the acquisition of OVH and has full access to dollars at CBN’s official rates. The NNPC also has access to products through swap arrangements.
Akpani decried the absence of a level-playing field that guarantees access to dollars for all marketers at official rates, noting having the NNPC as the sole importer of PMS was not sustainable, considering the huge consumption of the product.
She said strategic decisions must be made in the industry to ensure Nigeria takes full advantage of expected growth in oil products demand across Africa. “For us in Nigeria, this will include full deregulation of the sector and a deliberate strategy geared towards creating an enabling environment for all petroleum marketers to add value, alongside the NNPC,” she stated.
Akpani said DAPPMAN considers the government’s plan to remove subsidy in 2023 as the right decision that will reposition the sector for sustainable growth and development, while freeing up funds to shore up the capacity needed to transform the health, education, defence, and transportation sectors among others.
“As we approach the Yuletide and transition to the election year in 2023, the nation needs the full involvement of all operators to shore up capacity and ensure product availability at excellent service levels. While there might be fears regarding possible scarcity of PMS, DAPPMAN assures Nigerians of its ability and willingness to work assiduously to ramp up supply as the government addresses the challenges of FX availability in the sector,” she said.
DAPPMAN added that the Federal Government and the Nigerian Midstream and Downstream Regulatory Authority for emerging gains in the sector, especially, following the introduction of the Petroleum Industry Act.
“There have been important meetings aimed at shaping a sustainable future for the sector. These must continue as the success of the sector in the face of the intervening global energy crisis depends on collaboration and consideration of how operators can shore up capacity on the wings of market-friendly policies and a level-playing field,” Akpani said.