The recent price increase of a litre of Premium Motor Spirit (PMS), commonly called petrol, to a price band between N135 and N145 from N86.50, has reduced demand and is gradually setting efficiency in the system.
At the height of the fuel scarcity in April, Nigeria’s national oil company NNPC loaded 1,082 trucks with 38,285,000 litres capacity to be distributed throughout Nigeria.
Yet nightmarish fuel queues had drivers sleeping in fuel stations and inspired tear-inducing traffic logjams.
Bello Rabiu, group executive director, upstream of NNPC, had said that the organisation spent $1.8 billion in the first quarter of 2016 to import fuel.
This translates to a daily spend of between $16million and $20million on imports of 39 million to 40million litres of petrol.
BusinessDay checks around major depots with shipping data indicate that Nigeria’s petrol demand has hovered between 30 and 33 million litres per day since price change policy took effect on May 11.
Nigeria’s petrol demand has never been determined by market realities, but enmeshed in tangential considerations ranging from subsidy policy, collusion between oil marketers and fraudulent government officials to falsify records and systemic inadequacies that shrouded true demand.
“Of course, Nigeria has never needed all that demand (40 million), it is largely due to diversion that the figures rose so high,” said a representative of a major marketer with ties to the NNPC who spoke to BusinessDay.
Industry operators say the new policy has eliminated incentive to smuggle Nigeria’s fuel across borders.
“Supply has been very high and demand has not been high as before. It is no longer profitable to take it outside the borders with our own price, and increase in price has also led to reduction in consumption,” said an independent marketer who spoke to BusinessDay on condition of anonymity.
A source in Benin Republic confirmed that there has been a reduction in the volume of Nigeria’s fuel coming to the country that has reflected in a slight change in the price of the smuggled fuel.
“I have noticed a marginal increase in black market prices of about 25CFA,” said Charles Chigborum, a Nigerian student in Cotonou.
BusinessDay gathered that the price increase to N145 is setting in efficiency in domestic petrol consumption.
As a result of this development, officials of corporate organisations are becoming more disposed to pool cars and other car sharing arrangements are becoming widespread among employees.
“Due to fuel cost, I have had to hitch rides from colleagues on some days when things are tight and at other times, I give them a ride too,” said Kola Adewole, an official of a telecommunication’s outfit.
There is also increased patronage of commercial transport systems according to BusinessDay observations.
Also individuals who routinely drive into filling stations and order a fill-up for their tanks now buy with caution.
“It seems everyone is cutting down on the quantity they usually buy,” said Kemi Sunday, a petrol attendant at Conoil filling station along Ikorodu road.
Households, who run petrol-powered generators to augment abysmal power supply, also now regulate the use of generators.
A resident of Ojo local government, Emmanuel Kalu said, “I used to run my generators for at least ten hours a day, when there is no power supply, but now I run the generator for three or four hours a day.”
Analysts say a complete deregulation will allow market forces to play out which will encourage investments in the sector, eliminate rampant patronage, rent-seeking activities and corruption.
“It will free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, and the education sector. It will boost private investment in the downstream oil sector, especially in petroleum product refining,” said Muda Yusuf, director general of the Lagos Chamber of Commerce and Industries.
“It will ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as foreign reserves.”
ISAAC ANYAOGU & PRECIOUS ALINTA
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