FG fixation on petrol price cause of acute shortage

Operators of Nigeria’s downstream oil industry have blamed the Federal Government’s fixation on the price at which refined products are delivered to motorists for the lingering fuel shortage that has virtually grounded the economy and brought pain and misery to Nigerians.

According to them, problem began after the government tacitly excluded any provision for fuel subsidy in 2016 without deregulating the sector.

Instead, the government went ahead in January 2016 to alter the PPPRA template for determining petrol price by eliminating the importer’s margin of N10 per litre and cutting the terminal charge of N2 by 50 kobo by litre.

BusinessDay learnt that once government did this, many of the private importers who were already facing acute shortage of foreign exchange, completely abandoned the business of importing petrol.

According to one senior industry chief, “today’s scarcity can be traced to the decision taken by government that there will be no subsidy in 2016. There would not have been any problem with this if the price were deregulated. However, the government insisted on maintaining the regulation of the sector and at the same time, taking away the margins, so some of the importers simply walked away.”

It was to rescue the crisis that this created that  forced NNPC to take over the task of importing 100 percent of the petrol requirement for Nigeria and because this was done without any proper planning, orders were not placed on time and in sufficient volume to meet the entire domestic demand. More importantly, many of the refineries abroad were re-tooling ahead of the summer busy period, producing reduced volumes of PMS, thereby resulting in a significant decline in availability, especially for unplanned requests like those from Nigeria.

Stunned by its policy failure, the Federal Government has now made a volte-face and admitted that subsidy will be paid, while also adjusting the pricing template by restoring a margin of N2 per litre to the importers and also increasing the terminal or storage charges by a third to the old level of N2 per litre.

The government has also begun discussion with the IOCs to sell foreign exchange directly to importers without crude oil producing affiliates to improve their access to foreign exchange.

BusinessDay learnt that importers like Mobil Oil and Total Oil were already enjoying this relationship with their IOC affiliates.

Under the new dispensation, the NNPC will by itself import 60 percent, while the private companies will bring in the balance of 40 percent going forward.

About $16 million is required daily to fund Nigeria’s petrol requirement.

The allocation documents were sent out by NNPC to the oil companies in the last one week and even if the firms were to issue purchase orders this week, the earliest that the bulk of the consignments will arrive Nigeria and spread out to areas outside Lagos and Abuja will be the end of the month or May, which Ibe Kachikwu, Minister of Petroleum had mentioned last week, when he got into trouble.

“The minister was being honest when he said May,” said one industry chief. “He probably did not reckon that he would be quoted, and given the pain people were already feeling, he was bound to get into trouble once it was published.”

Our reporter learnt that the success of this arrangement will be contingent upon the IOCs making enough foreign exchange available to the importers and also upon NNPC playing its role of supplying the 60 percent of the daily requirement of 40 million litres.

Because there is no guarantee this will happen, operators cannot bet that the days of fuel shortage in Nigeria can be forgotten for as long as government fails to deregulate the sector to promote the flow of the required investment into a sector nearly abandoned.

Meanwhile, fuel queues across the nation continue to grow longer by the day, while fewer and fewer stations are getting fuel to dispense and the black market is thriving, while hapless Nigerian households and businesses are being cut off from this lifeblood.

There are three categories of businesses selling fuel across the country. The first two are fuel stations owned by the major marketers and independent operators respectively. Then there is the black market operating from the roadside.

As at yesterday in Abuja only a few stations were selling petrol while desperate motorists resorted to buying from the black market at N150 per litre.

In Benin, the black market price for petrol rose to between N230 and N300 per litre. The same was the case in Jos and Abeokuta.

In Lagos, motorists endured long queues at petrol stations, some of which had no petrol to dispense while independent marketers sold  at N180 and the black market operators sold at N220.

Olusola  Bello