Africa’s biggest oil producer imported 20.89bn litres of Premium Motor Spirit (PMS) in 2019, which comes to about 57.2 million litres every day, to augment supply from the country’s rickety refineries, data from the National Bureau of Statistics (NBS) show.
Nigeria has a problem. The country is one of the world’s largest exporters, yet it remains heavily dependent on the importation of petroleum products since its four major oil refineries have been under-utilised.
According to NBS report, PMS is currently topping the chart on the volume of refined petroleum products imported into the country, as a total of 20.89 billion litres was brought into the country in 2019.
Other imported petroleum products include Automotive Gas Oil (AGO) of 5.15 billion litres, Household Kerosene (HHK) of 128.1 million litres, aviation turbine kerosene (ATK) of 1.o7bn litres, Low Pour Fuel Oil (LPFO) of 45.98 million litres and Liquified Petroleum Gas (LPG) of 526.06 million litres.
Yomi Akinola, an analyst with the rating agency Agusto & Co said access to credit from financial institutions given the weak financial condition of operators (particularly independent marketers), who are burdened by soaring receivables from the Federal Government of Nigeria under the Petroleum Support Fund programme, as a major constraint to growth.
In terms of distribution and consumption, the Agusto report stated that Lagos leads in PMS, AGO, LPG, Aviation fuel consumption given the strong population in the state as well as the fact that a good number of airlines prefer to refuel in Lagos.
“Rivers leads in consumption of household kerosene (HHK). This has seen significant reduction because of the increase in the use of cooking gas by people,” Akinola said in an Agusto report.
Also, information gathered from Petroleum Products Pricing Regulatory Agency (PPPRA) revealed private oil marketers have now joined the Nigerian National Petroleum Corporation (NNPC) in the importation of petrol.
Before the downstream oil sector was liberalised in March this year, the NNPC used to be the sole importer of petrol, a task it handled for more than two years.
“Many of them (marketers) have gone to import because they took QMs from us to bring in products and I am sure they are doing that already,” PPPRA’s General Manager of Corporate Services, Kimchi Apollo, said.
“The QM is just like a pass to go and bring in products. You come to us to say you want to bring in products and then we say go ahead based on the pass that we give,” he said.
He explained that the market had been liberalised, with both the NNPC and other marketers now shopping for refined petroleum products from international refiners.
Apollo also noted that the agency had been working with the Central Bank of Nigeria to make foreign exchange available to marketers for petrol imports.
He said, “Both major marketers and others who have the competence to bring in products have been given QMs to do so. However, some yardsticks should be met before any marketer can bring in products.
“Also, the PPPRA is doing its best to liaise with the CBN to ensure that marketers are not discriminated against. They too should have access to forex as much as the NNPC. So they should have a level playing ground.”
When asked if the PPPRA had allowed marketers to determine the price of PMS based on the competitive market situation currently in place, Apollo replied no.
In the last few years, Nigeria has produced just under two million barrels a day, yet has only been able to process less than one hundred thousand barrels a day.
For Nigeria, importing petrol has always put a strain on foreign reserves. And in the not so distant past, it has also led to petrol scarcities in situations where petrol could not be imported.
The culprit for our reliance on foreign suppliers is our ailing refineries. In full operation, Nigeria’s refineries have the capacity to produce enough petrol for most of our consumption. However, this has not been the case for many years.
Refineries typically have a utilisation capacity of over 90percent. Anything below that is generally not profitable as the fixed costs to run the refineries could exceed the gains from the sale of the refined products. Yet, Nigeria’s refineries have consistently operated under 25% in recent months.
In fact, Nigeria’s refineries did not process any crude oil from July 2019 until January 2020. Venezuela, despite its political and economic crisis, still had its Paranguana refinery processing 80,000 barrels of petrol a day (a utilisation capacity of 29%).
