Another round of petrol shortage

The ugly sights of vehicles that snaked for kilometres out of filling stations were a reminder of the enduring fragility of the fuel distribution system in the country, and the instability in the petroleum industry generally.   As often the case, it was payday for black marketers, who sold at between 150 naira and 250 naira […]

The ugly sights of vehicles that snaked for kilometres out of filling stations were a reminder of the enduring fragility of the fuel distribution system in the country, and the instability in the petroleum industry generally.   As often the case, it was payday for black marketers, who sold at between 150 naira and 250 naira per litre, against the official price of 85 naira per litre.
 As the shortage bit harder, the Petroleum Products Pricing and Regulatory Agency (PPPRA) announced that a billion litres of the commodity would be imported to bridge shortfalls in supply. As usual, the Ministry of Petroleum Resources announced that there was sufficient stock of petrol to last through March, and accused marketers of either hoarding or diverting the product.  The National Union of Petroleum and Natural Gas Workers (NUPENG) said the crisis was partly caused by government’s alleged refusal to pay fuel marketers for previous imports. The oil marketers themselves claimed they were importing the product at a loss because of the devaluation of the naira. They also lamented that due to their indebtedness, banks were refusing to issue Letters of Credit to them. Even the ruling Peoples Democratic Party (PDP) said the shortage was a ploy by the opposition All Progressives Congress (APC) to embarrass the government!
The Minister of Finance, Ngozi Okonjo-Iweala, weighed in, saying that as part of efforts to tackle the situation, oil marketers had been given 30 billion naira as compensation for the losses they recorded as a result of devaluation of the naira. This was in addition to the payment of N185 billion debts owed the marketers, which the government had agreed to offset with the issuance of the Sovereign Debt Note (SDN) by the Debt Management Office (DMO). Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, said the apex bank had met with banks and oil marketers to resolve all contending issues associated with credit facilities.
All the frantic activities mirror what happened in the past on many occasions; no lessons had been learnt from them.  Despite producing about 2.2 million barrels of crude a day, Nigeria cannot boast of functional facilities to refine it.  It is embarrassing that it is the only OPEC member that to date still imports refined products. It is not enough for the government to resort to short-term measures each time there is fuel scarcity. There is need for a permanent solution to the problem. In 2012, the federal government signed agreements with Chinese companies for the construction of three refineries; the deal is yet to see the light of the day. Also in 2012, a $4.5 billion contract was signed for the construction of six mini-refineries in the country, with combined capacity to refine 180,000 barrels of oil per day, enough to meet domestic need and for export.  Almost two years later, nothing has been heard of the project either.
The prospects of resolving the issue under the current policy framework are doubtful, with the Minister of Petroleum Resources, Diezani Alison-Madueke, saying recently that Nigeria and other African countries would continue to be net importers of petroleum products for the next 20 years, even with the availability of functional refineries. She asserted that plans to build more refineries would not change that bleak prognosis.
In a somewhat contradictory note, however, President Goodluck Jonathan, reacting to the latest fuel crisis, said ‘the only way’ to tackle the menace was for the nation’s refineries to function. The question is why are they not functioning now?  The current regime of issuing licences for imports has become a lucrative avenue for some and veritable source of political patronage for others.  Ending the cycle and the corruption that sustains it would require political will, which, unfortunately is sorely lacking now. Unless that is done, it is only a matter of time before the next round of fuel shortage hits the nation again.  Any reform should include a review of the chaotic situation in which thousands of trucks laden with fuel traverse the length and breadth of this vast country to deliver the products.