Fuel queues: Dollar shortage crimps petrol imports, subsidy payments
Commercial bus fares have risen by as much as 50 percent across many parts of Lagos including on ride-hailing apps, and food prices are also trending upwards as Nigeria cannot find enough dollars to pay for petrol imports or subsidies on them.
BusinessDay observed long queues in petrol stations in many parts of Lagos, mostly on the mainland areas of Ketu, Ikorodu, Festac and Surulere. Young men were seen with cans hustling up drivers who could not wait.
Some petrol stations, especially along Ikorodu road and on the island, were not dispensing products and those who are causing a pile-up on roads worsened the chaotic traffic in the state.
A litany of reasons have been given by petrol marketers for this particular round of scarcity, ranging from extortion by touts and security operatives, new taxes by the government and inability to find enough products at the depot.
But these are merely symptoms of a cancer that has started to metastasise.
Godwin Emefiele-led Central Bank of Nigeria’s unorthodox foreign exchange management, with different rates quoted for foreign currencies for different classes of investors, has seen many abandon investments in the country, putting a lid on a veritable source of foreign exchange.
To make matters worse, Nigeria is not selling as much crude oil as it used to due to rampant crude theft that has forced many operators to turn off their taps.
For months, the central bank has been conserving foreign exchange, making a tough call between giving the scarce remittance the Nigerian National Petroleum Company (NNPC) brings in for local manufacturers who need to buy imports or to use it to import petrol.
The Federal Government has insisted on paying subsidies for petrol, effectively shutting out local marketers who could source their foreign exchange to import petrol if the price per litre could guarantee commercial returns.
The President Muhammadu Buhari government says it would stop paying subsidies by June next year, just two days after he hands over power to his successor, whose problem it would then become.
The NNPC has been unable to keep up with required volume needed for the country in the wake of massive investments it is making to explore oil in frontier basins, pay into Federation Account Allocation Committee and generate enough to spend on petrol subsidies.
Data from the state oil firm showed it paid N210.38 billion, N219.78 billion, N245.77 billion, N271.59 billion, N327 billion, N319.176 billion and N448.787 billion as subsidies on petrol in January, February, March, April, May, June and July respectively.
Since then, oil prices have gone up, forcing it to import fewer volumes to keep up with the payments.
Mike Osatuyi, national controller, operations at Independent Petroleum Marketers Association of Nigeria, told journalists that their members are finding it increasingly difficult to find petroleum products from depots as there is not sufficient quantity for their members.
“No fuel. Even when we were able to get a small quantity, DAPPMAN sold it to us at N200/N202 per litre. By the time we transport it to our stations, the cost would be around N210/litre,” he said.
On Tuesday, Olufemi Adewole, executive secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), at an oil sector event in Lagos, said marketers were unable to secure foreign exchange at the official CBN rate to enhance the supply and distribution of petrol.
According to DAPPMAN, shortage of foreign exchange, coupled with several unauthorised levies, and bad roads are among the factors making fuel importation and distribution burdensome for members.
The marketers are also peeved at the new 0.5 per cent tax on gross turnover of the petroleum marketing firms proposed by the Federal Government’s Finance Act.
Petroleum products marketing firms in Nigeria, with historically low margins from the sale of products, have had to contend with a cash-strapped government’s desperation in foraging for revenue, even though it had failed to implement the reforms that would make operators profitable.
The firms, which are on the brink, could shutter their businesses, triggering total chaos in the distribution of petroleum products across Nigeria, if the government insists they pay taxes on turnover in a business with very narrow margins.
“The petroleum marketing firms’ trading margin is too small that they cannot pay such an amount sustainably. Petroleum marketers operate at a very low margin but the turnover is very huge. Unfortunately, the margin does not correspond with the turnover,” said Adewole.
He said the margin they made when petrol was sold at N40 per litre was the same when the price rose to N160 per litre and N200 per litre respectively.
The marketers have also complained of logistics challenges in distributing the products they manage to load from the depot. Policemen, officials of the Lagos State Traffic Management Authority, and thugs, who the Lagos state government says do not work for it, harass tanker drivers daily in a bid to extort them.
Roads are hazardous, like the Ijora-Apapa road, where at least one truck collapses daily trying to navigate the road.