Fuel scarcity has become a permanent fixture in the Nigerian system. Assurances from government, and reasons for its reappearance come in liberal doses every time, and all the time, this nightmare comes. Chika Izuora writes.
The current scarcity of premium motor spirit (PMS), otherwise referred to as petrol did not come as a bolt from the blues. The signs were ubiquitous.
Nigeria produces more than two million barrels of crude oil per day, it refines little of it, and relies much on imports that are price-controlled by the government. Late last year, it effectively scrapped a costly subsidy scheme that paid importers the difference between international prices and capped local prices.
The country also faces a severe dollar shortage as oil revenue which account for almost all its foreign reserves continues to decline. The central bank has imposed hefty restrictions on dollar access – leaving physical oil cargoes as its most reliable currency.
NNPC turned to its own neglected refineries, aiming to produce 30 per cent of Nigeria’s petrol requirement this year. But none of the four refineries has run consistently, making Nigeria as reliant as it has ever been on imports.
The above state of affairs elucidates why Nigerians always predict correctly when to embark on fright sourcing of the product in the face of assurances of availability from relevant government agencies responsible for making the product available.
The anecdote of petrol shortage has transcended all logic as government and marketers would rather trade blames than seeking solution to the problem that seem to have become intractable.
The ongoing stress in accessing the product is apparently caused by delay by the Nigerian National Petroleum Corporation, NNPC, to sign pending agreements for the exchange of crude oil for petroleum products as well as oil marketers inability to access the dollar to import the product.
Oil marketers and local sources shortly before the situation became real told Reuters news agency that new fuel bookings have shrunk with marketers left with fewer options for importing the product. One of the traders said the new petrol fixtures “has ground to a halt,” and that “nothing is finalized … so there is literally zero discussion going on,” Reuters reported.
The report also revealed that the NNPC was trying to sign additional long-term contracts to cover well beyond the 210,000 bpd of oil that was exchanged in the past. This is coming after NNPC signed deals last year with refiners: Total, Varo Energy, Cepsa and ENI to exchange crude directly for petrol and other products beginning from February.
Litasco, Noble and Total also secured spot swap contracts with NNPC via local joint ventures in February and March, including Sahara Energy Limited that also won spot swap deals in March.
Some trading houses and refiners were said to have met with NNPC officials in Abuja and London over the past month, promising that they can quickly move vessels with petrol to Nigeria. But negotiations took longer than expected, leaving a gap in imports.
“NNPC has managed to fulfill around 2.25 million tons,” one trader said, explaining that, that left them around three quarters of a million tones short.
Some 200,000 tons of petrol berthed offshore Nigeria, but this covers just over a week of consumption in Nigeria. New March bookings have slowed to just over 100,000 tons, which is nowhere near what is required.
With the naira falling in the parallel market by almost 50 per cent, oil marketers are not favourably disposed to making a move unless they have swap contracts in hand.
With the signs obviously suggesting a crises situation, the NNPC issued a statement urging citizens not to panic, or hoard petrol, reassuring consumers that it had enough product.
Operators in the sector believed also that the delay by the Petroleum Products Pricing Regulatory Agency (PPPRA), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), in releasing the first quarter allocation for petrol to marketers, further triggered the new round of fuel agony for Nigerians.
The delay in the release of the fuel import allocation by the PPPRA was said to have made marketers handicapped in importing the product on time. The allocation, which was expected in January, was released late last month. The oil marketers had submitted their applications since last year.
This delay has in the past one week, unleashed a fresh round of scarcity across the country, rubbishing the federal government’s touted ability to end fuel scarcity in the country.
The scarcity, speculations from numerous sources suggest that besides the delay in the allocation to importers, the other possible reason that the scarcity resurfaced is that importers are alleging that they are now being forced by the PPPRA to pay additional N2 cost per litre of petrol, which they are at the same time trying to pass on to the consumers.
The Major Oil Marketers Association of Nigeria (MOMAN) had before now cautioned the federal government over the looming fuel scarcity in the country, on account of non-approval of importation allocation of petrol for the quarter.
The scarcity of the product went from light to intense in Lagos at the weekend, with most stations not selling, claiming to have run out of the product. Long queues sprang up in many filling stations in different cities of the federation.
Obafemi Olawore, executive secretary of MOMAN, said that the NNPC had offered to give marketers two ships of about 37,000 metric tons, amounting to about 50 million litres, saying that one of the marketers would bring in 22 million litres this week and others would follow next week.
The situation has led to hoarding and diversion of products as well as other underhand practices like selling above regulated price by marketers.
The reasons some of the dealers gave for hiking the price are that the ex-depot price has jumped up from N91.50 to N95 per litre. So also have other ancillary costs, thus, increasing the cost of petrol above N100 per litre, they said. They claimed that the union fees on a litre of the product, which was 30 kobo, now hovers around 50 kobo and that transport costs have likewise gone up.
Olawore had warned that the current depletion rate in stock level of fuel at the depots was high and needed to be replenished urgently. “MOMAN depot at Apapa, which controls about 33 per cent of national demand, had very little stock to push out for sale. Some major oil marketers in the country had totally run out of stock,” he said.
Mike Osatuyi, national operations controller of the Independent Petroleum Marketers Association of Nigeria (IPMAN) said that huge supply gap is a major reason for the ongoing crises. He also alluded to scarcity of dollar as a major constriction to marketers’ inability to import.
Following the shortage in allocation, private oil marketing companies have exhausted the allocations approved by the Petroleum Products Pricing Regulatory Agency (PPPRA) to import petrol for the first quarter of 2016.
It was gathered that with the tight supply situation, over 5,000 marketers who paid for NNPC’s products have not been able to load from seven private depots– MRS, Folawiyo, Hyden, Capital Oil, Ascon, Aiteo and NIPCO, which have throughput agreements with the corporation.
PPPRA had approved the importation of 1.5 million tons of petrol for private marketers as first quarter fuel import allocations.
While the agency slashed the allocations to private depot owners and marketers by over 70 per cent to 22 per cent, it increased NNPC’s allocation to 78 per cent.
Before this development, private marketers had accounted for 60 per cent of fuel imports, while NNPC was responsible for 40 per cent.
However, NNPC, which claims to have the capacity to wet the country with products, is faced with logistics challenges, as most of its stock of petrol is in vessels on the high seas, instead of the depots.
A meeting of the depot owners and marketers, which held at PPPRA headquarters in Abuja to address the shortage could not hold, as senior oil workers under the aegis of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) had sealed the agency’s headquarters in protest against the appointment of two acting executive secretaries for the agency.
Following the sack of the heads of 25 agencies, including the immediate past executive secretary of PPPRA, Mr Farouk Ahmed by President Muhammadu Buhari, Farouk handed over to the most senior person in the agency, Mr Moses Mbaba in line with government’s directive.
But a few hours later, the Ministry of Petroleum was said to have sent NNPC’s manager in charge of HSE, Mr Sotonye Iyoyo to take over as the executive secretary of PPPRA, a development which prompted PENGASSAN to seal off the headquarters of the agency in protest.
Though the NNPC assured the public that it has enough products in the system, it was gathered that the products are in vessels on the high seas and not in the depots.
NNPC’s spokesman, Mr Ohi Alegbe, however, said that the deliveries of the four cargoes, which amount to about 180 million litres is part of a new arrangement by the corporation to have a cargo of petrol delivered daily as from March.
Alegbe quoted the minister of State for Petroleum Resources, Dr Ibe Kachikwu, as warning depot owners against selling petrol above the approved ex-depot price of N77 per litre.
The warning comes against the backdrop of repeated complaints by marketers of sharp practices at the depots.
Meanwhile, the federal government is at the current pump price of N86.50 per litre of petrol which it approved for independent petrol marketers and N86 per litre for stations operated by NNPC, making an over-recovery of N16.97k and N16.30k respectively from oil marketers.
The pricing template for petrol which the PPPRA released on February 20, indicate that the open market price of the product for both independent marketers and NNPC was N69.53k and N69.70k respectively.
The open market price for NNPC includes the landing cost per litre, which is N50.42k plus other margins costs of N14.30k, while that of the independent marketers is N55.23k plus N14.30k, suggesting that for every litre of petrol that was imported into the country from the effective date of the template which was February 20, Nigerians would be paying either N16.97k or N16.30k in excess of the actual market price of petrol depending on their preferred purchase points of either NNPC or independent stations.
This development is also backed by the price modulation mechanism for petrol which the government introduced in place of outright deregulation of the product, a policy that has discouraged marketers from importation.
