Nigeria’s Intractable Fuel Crisis – Economic Confidential

Nigeria’s Intractable Fuel Crisis

By Hafsat Ibrahim

Despite being the largest producer of crude oil in Africa, scarcity of petroleum products is an incessant problem in Nigeria.

In most cases, hike in the pump price of PMS (Premium Motor Spirit) or a proposed hike is what eventually triggers fuel scarcity.

Fuel crisis began in 1966 during the first military regime of General Yakubu Gowon who increased fuel price from 6kobo to 8.45 kobo per liter. When General Murtala Mohammed assumed power in 1975, the price also increased from 8.45kobo to 9kobo, between 1976-1979. Major Olusegun Obasanjo also increased the pump price from 9kobo to 15.3kobo.

The price of fuel kept increasing yearly as a culture in all past leaders’ regime not until late President Umar Musa Yar’adua reduced the fuel price from N75 to N65 per liter. During President Goodluck Jonathan’s regime, the pump price changed three times ranging from N65 to N141 and finally N87. Despite his campaign promise to reduce the price of fuel, the price rather increased to N165 under President Muhammadu Buhari.

The recent fuel scarcity in Nigeria is due to the importation of adulterated fuel into the country.

However, some Nigerians are of the view that the current fuel scarcity a ploy by the Buhari administration to impose the botched petrol subsidy removal on them. In response to the failure to remove subsidies from petrol, they claim the government has created artificial scarcity to inflate prices.

Some energy policy analysts pitched tent with the above bias, adding that Nigerians are paying the price for standing against the government in its plans to remove subsidies and further impoverish the masses.

The fuel crisis actually started as early as November 2021 when the Minister of Finance, Budget, and National Planning, Zainab Ahmed, announced that Nigeria will remove fuel subsidies by 2022 and replace the subsidies with a transportation grant of N5000-a-month to the poorest Nigerians. Since then, retailers, whom NNPC have accused of hoarding fuel, have refused to resume normal operations. This has continued despite the suspension of the subsidy removal plan approved by President Buhari in January 2022.

As of December 2021, the NNPC reported that Nigerians consumed over 19.5 billion litres of petrol annually and an average 1.6 billion litres of petrol monthly. The NNPC also mentioned that they made over N2.5 trillion from the sale of petrol between 2020 and 2021. In October 2021, the Organization of Petroleum Exporting Companies (OPEC) stated that Nigeria exported $27.7 billion worth of petroleum products in 2020. OPEC also highlighted that Nigeria’s petroleum imports were much higher, at around $71.3 billion.

The issue of fuel scarcity still lingers in the country due to the carefree attitude of the NNPC and other supervisory agencies. If at all they have conducted due diligence thereby assessing the fuel, monitoring and confirming the quality before importation, there wouldn’t have been the case of adulterated fuel in the country.

Hoarding is another cause of fuel scarcity because some filing stations hoard the product and sell it to illegal people like the black marketers who will also inflate price before selling.

The welfare of the people has been negatively affected as a result. People sleep in the queue at fueling stations. The movement of people and goods has reduced significantly, slowing down the entire economy and pushing inflation further high.

Fuel scarcity has caused serious problems for vehicles across the country.

Because of the above, the GMD of NNPC Mallam Mele Kyari, apologized to Nigerians and reinstated his company’s effort to stabilize the situation. He stated this when invited into the Green Chamber by the House Committee on Petroleum (Downstream).

The GMD also assured that the company will inject 2.5 billion litres of petroleum into the nation’s supply chain to end the current scarcity in the country. The committee, following a resolution of the House, is investigating the circumstances surrounding the importation of petrol with high methanol content. This led to an acute fuel shortage in the country.

Kyari stated that the high methanol content of cargoes contributed to the scarcity and was not anticipated.

According to him, the withdrawal of the five cargoes created a gap that generated a shortfall in supply.
Nonetheless, he noted that the company had imported enough to fill the gap and restore supply.

The GMD said: “Eight months ago, it was impossible for somebody to blend methanol into gasoline meant for Nigeria because methanol is more expensive than naphthalene which is used for blending gasoline.

“In the current situation, there is a price differential which makes methanol cheaper than naphthalene which they use to blend and get commercial value. I don’t know what the case is, but these are the two instances in which someone can blend methanol.

“I can assure you that we have taken every necessary step to ensure that we maintain supply sufficiency. Let me tell Nigerians that we have a robust supply plan.

“By the end of this month, we will have about 2.5 billion litres of PMS.
“What we call panic-buying is a situation where people who usually go to the filling station to buy N2,000 worth of petrol now buy five times that volume and those with more than one car will bring out all their cars; that is why you see all these cars in the fueling stations and it creates supply disruption.

“We are assuring Nigerians that we have a robust supply plan and there is no need to bring out all your cars from the house. Just buy what you need because there are plans to address the situation.”
According to the GMD, Nigeria faces challenges in its petroleum industry due to wanton sabotage and its total dependence on imports.

“First, we import all the gasoline that we consume in this country. Every petroleum product that we consume in this country is not locally produced except in few quantities,” he stated.

Adediji Olamide, a member of the committee, faulted NNPC over the methanol mishap, saying the organization failed in its responsibility as a leading oil corporation.

In his words: “Ignorance is not an excuse in law. We are in a situation where all Nigerians are suffering as a result of an oversight or as a result of an unspecified request from NNPC to all the companies that are the importers of the cargo.”

However, some motorists groan as they now buy 10 liters for N7,000, the ripple effect is largely felt by passengers as transport fare has increased automatically.

The major solution to this perennial fuel crisis in Nigeria is paying attention to the job based on this experience. NNPC officials should start testing for methanol content levels for any imported petrol.

For the supply to stabilize, more petrol has to be imported to clear the queues and meet the subsequent usual daily demand. The importer of the adulterated fuel must take it back and re-supply its equivalent with some additional penalties.

Those individuals involved in hoarding fuel should be traced and halted by the government, and subsequently punished.
The conclusive solution to this embarrassment is to fix the refineries and stop importation of PMS.

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