THE current hitch in the supply of Premium Motor Spirit (petrol) across the country is scandalous. As Africa’s largest crude oil producer, many months of fuel scarcity, especially during the Christmas and New Year festivities, reflects the dysfunction in Nigeria’s public administration and the economy.
But this is not new, as petrol shortages have been recurring for over three decades. Scarcity resurfaced about four months ago, and has defied all logic and solutions. The government and its agencies are clueless, making disconnected statements and uncoordinated moves. Laughably, the latest was the directive by the State Security Service to the Nigerian National Petroleum Company Limited, Independent Petroleum Marketers Association of Nigeria, Major Oil Marketers Association of Nigeria, Depot and Petroleum Marketers Association of Nigeria and other stakeholders to resolve the current fuel crisis in 48 hours!
Others “directed” by the service were the Nigerian Association of Road Transport Owners, Nigeria Union of Petroleum and Natural Gas Workers and Petroleum Tanker Drivers Union.
The secret police vowed to go after the marketers if queues did not disappear after 48 hours. The queues initially appeared to have heeded the strange directive, but the reprieve did not last as the scarcity assumed a more acute dimension and frustrated Nigerians are spending many precious hours, some overnight, at dispensing stations.
The SSS explained that its intervention was to prevent any security implications or negative dimensions that could arise from the current petrol scarcity, adding that it was being proactive by curbing what could cause incitement in the country during the Yuletide.
It is a wrong way to solve a serious national problem; a domestic intelligence service cannot decree abundance of a scarce commodity. Moreover, such agencies work covertly, and if it knew or suspected sabotage, its remit was to work with the appropriate agencies, investigate, arrest, and prosecute those who broke the law. Issuing an ultimatum it cannot enforce trivialised a fundamental economic challenge.
Marketers have been selling the product at prices ranging from N175 to N300 per litre in defiance of the regulated pricing regime, signifying an out-of-control. Some private depots in Port Harcourt, Lagos and other cities have increased the ex-depot price to N235/litre as against the approved N148.17/litre.
Defending its meddlesomeness, SSS spokesman, Peter Afunaya, said, “Some people may want to query that what is our business in the fuel issue is? We make bold to say that the service is charged with the mandate of detecting and preventing crimes and criminalities that may want to jeopardise internal security of which this one is not an exception.” The tactic is crude; the SSS went beyond its brief.It can interdict saboteurs; but it cannot issue ultimatums to business operators. The agency is not the regulator of the petroleum downstream.
The scenario is further proof of the disarray in the regime of the President, Major General Muhammadu Buhari (retd.). A serious, coordinated government would have cobbled together an inter-agency effort, efficiently coordinated, and with tasks assigned to each agency. In that case, the SSS would not have been the one issuing ultimatums to private business operators.
The NNPC’s assurance that it has about 1.9 billion litres of fuel in stock, which can last beyond the period of the Yuletide, is not visible in the market. This is not surprising as the NNPC’s recent advertised makeover from a state-run monopoly to a limited liability company has failed to lift the behemoth from its cesspool of corruption, inefficiency, and opaque operations.
It has run the country’s four refineries aground but persists in sinking billions of dollars, some of it borrowed, in fruitless supposed Turn Around Maintenance. In recent years, the NNPC has been the sole importer of refined petroleum products in deals that ignite controversies over cost, and precise volume imported and distributed. Its inefficiencies are costing the country dearly. Irrationally, the government allows it to be the sole determinant of the subsidy it claims to have incurred and pays itself.
Many of its 21 fuel depots across the country are run-down. Instead, private depot owners are laughing all the way to the bank by charging exorbitant rates for storing the products leaving for marketers’ outlets on its behalf. Reports say it also owes indigenous shipowners $90 million, whose daughter vessels load the product from mother vessels berthed on the high sea for onward transfer to private depots.
The real problem is state involvement in the downstream sector and the failure to refine locally. Nigeria has capacity to produce over 2.5 million barrels of crude per day and its current OPEC production quota is 1.74mbpd; it is the world’s 14th largest producer in 2022 according to the US Energy Information Administration. It has no business therefore importing refined products. Instead, it should be a major exporter and the West, East and Central African hub for refined products.
But the country sabotages itself by holding on to four state-owned refineries that have not produced in recent years, have been making losses for over three decades and succeeded in driving out the private sector from domestic refining save for the brave Dangote Group, whose 650,000 barrels per day complex is due to be completed soon.
A state should not be a regulator and a player in the same market. The government should rather facilitate an enabling investment environment that will draw in massive local and foreign capital inflow to make the country a major international refining hub. It should exit the downstream completely and restrict itself to regulation and liberalisation.
With its monopoly in the downstream, the NNPC has been withholding money accruing to the Federation Account, using the costs incurred as an excuse. The country suffers on all fronts; the monopoly guarantees shortages and drives away the more efficient private sector and competition. Then, the taxpayer pays heavily for this, and next, revenue due to the three tiers of government from NNPC remittances is lost.
It deducted funds meant to be remitted to the Federation Account to cover petrol subsidy in the seven straight months to September 2022. Similarly, the country reportedly lost about N22.68 trillion in foreign exchange earnings as result of the crude swap regime in the last 18 months. Moreover, over N4 million is incurred subsidy payment this year. This national folly has to stop.
There is no alternative to privatisation: the refineries, depots, pipelines, and other downstream assets should be privatised. There should be an emergency national programme to stimulate private investment in refining to avoid exchanging the disastrous NNPC monopoly for a private monopoly. Only competition can guarantee efficiency, market-friendly pricing, and innovation.
In the interim, Buhari should stop treating the scarcity with levity. As President and as defacto petroleum minister, he should suspend his endless foreign trips, and coordinate an inter-agency effort to resolve the current supply logjam.
