The intractable fuel crisis in Nigeria – Economic Confidential

NNPC GMD, Mele Kyari


Nigeria’s intractable fuel crisis

By Hafsat Ibrahim

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

In most cases, an increase in the pump price of the PMS (Premium Motor Spirit) or a proposal for an increase is what ends up triggering a fuel shortage.

The fuel crisis started in 1966 under General Yakubu Gowon’s first military regime which raised the price of fuel from 6 kobo to 8.45 kobo per litre. When General Murtala Mohammed took power in 1975, the price also increased from 8.45 kobo to 9 kobo, between 1976 and 1979. Major Olusegun Obasanjo also increased the price at the pump from 9 kobo to 15.3 kobo.

The price of fuel continued to rise every year as a culture in the regime of all former rulers until the late President Umar Musa Yar’adua reduced the price of fuel from N75 to N65 per litre. During President Goodluck Jonathan’s regime, the price at the pump changed three times from N65 to N141 and finally N87. Despite his campaign pledge to reduce the price of fuel, the price instead increased to N165 under President Muhammadu Buhari.

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

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

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

The fuel crisis actually started as early as November 2021 when Finance, Budget and National Planning Minister Zainab Ahmed announced that Nigeria would phase out fuel subsidies by 2022 and replace the subsidies with a fuel subsidy. transport of N5000 per month to the poorest Nigerians. Since then, retailers, which the NNPC has accused of stockpiling fuel, have refused to resume normal operations. This has continued despite the suspension of the subsidy removal plan endorsed by President Buhari in January 2022.

In December 2021, the NNPC reported that Nigerians consume over 19.5 billion liters of gasoline per year and average 1.6 billion liters of gasoline per month. The NNPC also mentioned that it had earned more than 2.5 trillion naira from the sale of gasoline between 2020 and 2021. In October 2021, the Organization of Petroleum Exporting Companies (OPEC) said that Nigeria had exported $27.7 billion worth of petroleum products in 2020. OPEC also pointed out that Nigeria’s oil imports were much higher at around $71.3 billion.

The problem of fuel shortage persists in the country due to the reckless attitude of the NNPC and other watchdogs. If they had done due diligence, thus evaluating the fuel, monitoring and confirming the quality before importation, there would have been no cases of adulterated fuel in the country.

Hoarding is another cause of fuel shortages as some gas stations hoard the product and sell it to illegal people like black dealers who also inflate the price before selling.

The well-being of the population has been negatively affected. People sleep in the queue at gas stations. The movement of people and goods has dropped dramatically, slowing the entire economy and pushing inflation even higher.

The fuel shortage has caused serious problems for vehicles across the country.

Due to the above, the GMD of NNPC, Mallam Mele Kyari, apologized to the Nigerians and reinstated his company’s efforts to stabilize the situation. He said so when he was invited to the Green Room by the House Committee on Petroleum (downstream).

The GMD also assured that the company will inject 2.5 billion liters of oil into the country’s supply chain to end the current shortage in the country. The committee, pursuant to a resolution of the House, is investigating the circumstances surrounding the importation of gasoline with a high methanol content. This led to a severe fuel shortage in the country.

Kyari said the high methanol content of the shipments contributed to the scarcity and was not anticipated.

According to him, the withdrawal of the five shipments created a vacuum which generated a supply deficit.
Nonetheless, he noted that the company had imported enough to fill the void and restore supply.

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

“In the current situation, there is a price differential that makes methanol cheaper than the naphthalene they use to mix and get commercial value. I don’t know what it is, but it’s the two case someone can mix methanol.

“I can assure you that we have taken all the necessary measures to ensure that we maintain the sufficiency of the supply. Let me tell Nigerians that we have a solid procurement plan.

“By the end of this month, we will have about 2.5 billion liters of PMS.
“What we call panic buying is a situation where people who usually go to the gas station to buy 2,000 naira worth of petrol are now buying five times that volume and those with more than one car will walk out. all their cars; that’s why you see all these cars at gas stations and it creates a supply disruption.

“We assure Nigerians that we have a solid procurement plan and there is no need to take all your cars out of the house. Just buy what you need, because there are plans to remedy the situation.
According to the GMD, Nigeria is facing challenges in its oil industry due to wanton sabotage and its total dependence on imports.

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

Committee member Adediji Olamide blamed NNPC for the methanol incident, saying the organization had failed in its responsibility as a leading oil company.

In his words: “Ignorance is no excuse in law. We are in a situation where all Nigerians are suffering as a result of an oversight or unspecified request from the NNPC to all the companies who are the importers of the cargo.

However, some motorists are moaning as they now buy 10 liters for N7000, the ripple effect is widely felt by passengers as the fare has increased automatically.

The main solution to this perpetual fuel crisis in Nigeria is to pay attention to work on the basis of this experience. NNPC officials should start testing the methanol content levels of all imported gasoline.

For supply to stabilize, more gasoline must be imported to eliminate queues and meet the resulting usual daily demand. The importer of the adulterated fuel must take it back and restock its equivalent with some additional penalties.

The individuals involved in the fuel hoarding should be tracked down and arrested by the government, then punished.
The definitive solution to this embarrassment is to fix the refineries and stop importing PMS.