Buhari’s administration, downstream legacy and 13 months-old petrol scarcity
Oredola Adeola
The reputation that the Muhammadu Buhari administration had earlier garnered in the first five years of its administration has evaporated like oozing steam in the air.
The reputation was built on its ability to reduce disruptions in the supply of Premium Motor Spirit (PMS) also known as petrol to an almost negligible level nationwide.
The puncturing of that reputation of good handling of the crisis in the oil sector was caused by an unending fuel crisis that has lingered now for more than 14 months, with fears over its potential to extend till the end of the administration.
In the six years of the Buhari administration, supply was steady, as it sold at the retail end by far more than the official retail prices.
Just like a bolt from the blue, the crisis assumed a life of its own escalating to an unprecedented level around November 2021, when the FG proposed the removal of subsidy on petrol.
Nigeria has had several cases of fuel scarcity in the past which has caused untoward hardship, but never recorded a prolonged, persistent case but has never recorded the persistent case as one that came on stream, starting as early as November 2021, when Zainab Ahmed, Nigeria’s Minister of Finance, Budget, and National Planning, announced that the country will remove fuel subsidies by 2022 and replace same with a transportation grant of N5000-a-month to the poorest Nigerians.
Since then, fuel retailers, whom NNPC have accused of hoarding fuel, have refused to resume normal operations.
The FG in January 2022 later suspended the planned petrol subsidy removal, but the scarcity continued despite the suspension of the subsidy removal plan.
In February 2022, another major scarcity hit the country when about 100 million litres of Premium Motor Spirit(PMS) were stealthily brought into circulation and later found to contain methanol levels higher than the national specifications of 2-3 per cent.
While the crisis lingered for a very long period of time, pending when the off-spec product was completely removed from the market, another fuel scarcity resurfaced in May during Ramadan affecting different parts of North including Abuja.
The NNPC had then attributed that crisis to “low loadouts” and a high volume of purchases by residents who had just returned from the Eid holidays.
According to Garba Deen Muhammad, NNPC spokesman, the sudden appearance of fuel queues in parts of Abuja was due to low loadouts at depots which usually happen during long Sallah celebrations.
The NNPC scribe claimed that the sudden appearance of queues was due to the increased fuel purchases which are also usual with returning residents of the FCT from the Ramadan holidays.
The crisis thereafter became a regular phenomenon in Abuja, spreading to other parts of the North.
The scarcity also spread till June due to product insufficiency occasioned by supply inadequacy which was worsened by the scarcity and the rising price of Automotive Gas Oil (Diesel).
The trend thereafter persisted till July when truck drivers under the aegis of NARTO claimed a difference in the bridging gap cost between when the cost of diesel was N250 per litre and when it rose to as much as N820.
At the same, the Major Oil Marketers Association of Nigeria (MOMAN) also claimed that the supply framework cannot guarantee steady and consistent supplies to the country, given the current state of government finances and unpredictable international supply shortages.
In October, a scarcity of petrol worsened due to flooded roads in Kogi State that disrupted transportation of the petroleum products by tankers.
That flood crisis in Kogi State submerged many roads that truckers plied when conveying PMS to Abuja, grounding all vehicular movements, and consequently disrupting the supply of petrol to Abuja and other parts of the North.
On Monday, October 24, 2022, another major scarcity also emerged in some parts of Lagos State, resulting in an increase in the pump price of petrol in some parts of the country due to a hike in private depot prices.
The Independent Petroleum Marketers Association of Nigeria (IPMAN) attributed the crisis to the increase in the depot price of fuel from N148.17 per litre to N178 per litre.
The prolonged nationwide petrol scarcity extended till November spreading across Lagos, Abuja, Ogun, Port Harcourt, Enugu and other parts of the country as some filling stations now sell the commodity for as much as N250 per litre.
Albeit in NNPC mega stations and MOMAN’s retail stations were selling at N179 per litre, recording queues stretching kilometres and causing heavy traffic.
The situation went from bad to worse in the weeks leading to the Christmas holidays, in what was attributed to so many crises including the hike in ex-depots prices across all the private depots in Lagos from N215 per litre to N233 per litre instead of the official rate of N148 per litre.
Although in the last five years, petrol scarcity has been a regular feature during every Christmas and New Year period except for 2019, the 2022 crisis was compounded by several factors that had coalesced since 2021.
This affected travelers as they were forced to pay thrice for both intra and inter-state transportation to different destinations across the country.
Despite the 48-hour ultimatum given to the Nigerian National Petroleum Corporation Limited, the Independent Petroleum Marketers Association of Nigeria (IPMAN) and other stakeholders in the oil sector by the Department of State Services (DSS) in early December, to resolve the current fuel crisis, many filling stations, in Lagos, Abuja and other cities particularly those that belong to independent oil marketers, remained closed due to lack of products while others sold product between N260 and N300 per litre in some locations.
Only a few outlets belonging to members of MOMAN dispensed petrol for N170 per litre, recording massive queues.
The situation remained the same for the whole of December into the new year, without any sign of abating, leaving Nigerians to begin another new year with fuel crises.
NNPC’s claims that it had imported over 2.5 billion litres of petrol, enough to keep the country wet throughout the year and during the festive season proved abortive as the crisis remained the same.
Nigerians begin 2023 with regular fuel scarcity, while most marketers who have products to dispense sold from prices ranging from N250 to N300 depending on the location, while long queues are presently being witnessed in stations owned by MOMAN members selling for N170 per litre.
CAUSES
While the blame game continues with all major stakeholders in the downstream sector the Depots and Petroleum Products Marketers Association of Nigeria, DAPPMAN, are said to be selling petrol to Independent Marketers at N215 per litre.
The major marketers who received product directly from NNPCL got the product at N148 per litre, official charge, and sell at N170 per litre at their retail outlets across the country. The NNPCL retails on the other hands sells for N168 per litre in the Corporation’s filling stations across the country.
The NNPCL and the Nigeria Midstream and Downstream Petroleum Regulatory Authority(NMDPRA) in a recent statement, responding to the unending fuel scarcity, attributed the petroleum crisis due to distribution challenges faced by marketers.
According to NNPCL and the Commission, the scarcity and hike in the price of PMS due to the foreign exchange rate of N452 to a US dollar, even at a landing cost of N350 per litre.
Mele Kyari, Group Managing Director of NNPCL, in company of Chief Timipre Sylva, Minister of State Petroleum Resources, during a visit to the Armed Forces formations in Port Harcourt, being part of the government’s ongoing fight against oil theft, said the sector is faced with distribution challenges, not supply issues, he however confirmed the availability of sufficient products in the country.
According to him, ome marketers are diverting the products to other locations where prices are high.
Kyari said, “I don’t think that your data is correct that it is only one depot that is selling in Rivers State. 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.
“We are containing it. We know that there are logistics problems. We are aware that pricing today is a very serious challenge working with the partners and marketing companies and that balancing can come so that normalcy will come.
“The downstream has shut down seven depots, this is to bring control to depot price to normalize the price across the country.”
Farouk Ahmed Chief Executive NMDPRA, on his part said that the dollar exchange rate is another reason for the Petro crisis, which according to him has caused distribution challenges.
He said: “Supply has never been a challenge, but distribution. Although, it concerns the marine movement, where the marketers are moved to chatter vessels to move products from offshore level.
“Secondly is the issue of Nigeria’s depreciation, when we see improvement in the revenue generation maybe that will help the naira to stabilize. It is all intertwined.
“The landing cost of PMS in Nigeria is around N352 per litre, without the subsidy. Like it is on the Pump price and that pump price is on the basis of the official exchange rate of N450 per dollar.
“If you do not have it, for example, NNPC uses that as part of their benchmark and that is why they sell at about N352 per litre. Once it is don’t get to the secondary market the price will be what is it today.
Mr Festus Osifo, President, Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, blamed marketers and other operators of the petroleum downstream sector for the persistent shortage of petrol in the country and the current rise in pump price above government approved rate.
According to him, the persistent fuel shortages are being perpetuated by major operators within the downstream sector who have deliberately inflated the pump price far above the official price.
He said, “It is an embarrassment for non-state actors to arrogate to themselves the power to determine the price of a litre of fuel, far above the official rate used to determine petrol subsidy regime.
“It is more disturbing that the government and the NMDPRA are demonstrating high level of culpability in the unwholesome situation by its silence and unwillingness to frontally and publicly address the harrowing experiences of Nigerians in the current situation.”
MOMAN in its recent recommendation to end the fuel crisis in the country advocated for the review of the current single supplier strategy by the NNPCL, asking the government to comply with the provision of the Petroleum Industry Act (PIA) 2021.
The Association recommended gradual price deregulation for petrol to reduce the subsidy burden on the nation.
Olumide Adeosun, Chairman of MOMAN, in a recent statement revealed that the current supply framework cannot guarantee steady petrol supplies, given the current state of government finances and unpredictable international supply shortages.
Ukadike Chinedu, National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, attributed the crisis to petrol subsidy and the country’s reliance on imported petroleum products.
He speculated that the crisis may drag on till May or June this year, suggesting that the only solution is for the country to refine its crude oil locally while also getting the private and public depots working at the same capacity.
He said, “The exchange rate is affecting fuel imports, which is also why the cost of petroleum products is high. We use too much naira to chase the few dollars that are available.
Sergius Ogun, House of Representatives, and Ad-hoc Committee on Petroleum Downstream member had during a recent live telecast on Channels Television’s Sunrise Daily programme, said the entire supply and logistics value chain in the oil sector have been dollarised and this poses a challenge to fuel marketers.
The lawmaker said the Nigerian Ports Authority (NPA) and the Nigerian Maritime Administration and Safety Agency (NIMASA) charge docking fees and others in dollars despite a presidential directive forbidding that.
He added that Nigerian Ports Authority (NPA) and the Nigerian Maritime Administration and Safety Agency (NIMASA) charge docking fees and others in dollars despite a presidential directive forbidding that.
According to him, oil suppliers and marketers scavenge for dollars at the black market to pay government agencies as the Central Bank of Nigeria (CBN) doesn’t release forex to them.
The Reps member noted that marketers go to the black market to buy dollars for these transactions with government agencies within the country
While there seems not to be an end in sight concerning the fuel scarcity, EnergyDay, however, established that most times when an administration is about to leave, all forms of crisis will escalate including scarcity of petroleum products. It happened during the time of former President Goodluck Jonathan and now under President Buhari’s administration.
