Why biting fuel scarcity will persist
Despite promises by President Muhammadu Buhari that the government is doing everything to put an end to the current biting fuel scarcity in the country, it is likely to extend to the end of the year and become a frequent occurrence in 2018, BUSINESSDAY investigations have shown.
A spike in crude oil prices in international markets has significantly increased the subsidy element in the current pricing regime in the country making it more difficult for the government to sustain it.
Maikanti Baru, Group Managing Director, Nigerian National Petroleum Corporation (NNPC) admitted yesterday that the landing cost of fuel is now at N171 per litre well above the N145 per liter current pump price of the product. This brings the average subsidy per litre to N26 and average subsidy per day to N850 million, based on average consumption of 33 million liters per day. This is excluding distribution and profit margins of markets, which could take the subsidy up about N40 per litre or N1.32 billion a day.
Sources in the oil and gas industry have told BUSINESSDAY that the NNPC would find it increasingly difficult to sustain this level of subsidy payments if crude oil prices remain at current levels, which will lead to intermittent supply deficits in 2018 and consequently long queues at the fuel stations. Brent crude prices closed at above USD 65 per barrel yesterday and unconfirmed reports say some of NNPC crude oil suppliers are already having challenges sustaining supply due to the unexpected jump in crude oil prices in the international markets.
The shortfall in supplies has forced the NNPC to directly intervene in the importation of petroleum products to bridge the shortfall. Baru confirmed yesterday that about 13 vessels are presently discharging petroleum products at various seaports across the country. The NNPC is currently bearing the full cost of the subsidy as the Federal Government has failed to make provision for subsidy in the budgets since 2017. The subsidy appears in NNPC books as under recoveries.
Many Nigerians are spending the Christmas day at fuel stations instead of their homes as the fuel scarcity bites. BusinessDay investigations that Nigerians have been forced to buy fuel at between N250 to N500 per litre in a bid to power their cars and generators as power supply has also significantly dropped to most homes, a coincidence that is making many Nigerian have a ‘dark’ Christmas.
Vice President Osinbajo had a meeting with fuel marketers on Christmas Day but details of the discussion were not disclosed. Laolu Akande, the Vice President’s spokesman however assured that the government is working ‘round the clock’ to ensure the fuel scarcity ends in the next few days.
Baru, on Sunday in Abuja, while briefing newsmen, also reassured of adequate supply of products in the country soon, but this relief will only be temporary, based on the current realities in the international market.
Baru disclosed that three vessels have been discharging fuel with each having an average of 650 million litres capacity, adding that three more vessels were expected to berth before the end of the week.
He said the Federal Government had instructed the Navy, NIMASSA , Customs and all stakeholders to expedite clearance and anchorage services to facilitate speedy products transfers to various depots.
He noted that with the efforts on ground, queues were expected to disappear in couple days.
He said the NNPC had instructed a 24 hours loading and sales operations at all its depots and Mega stations and also advised major marketers to carryout 24 hours operations too.
“In addition to regular supply circle, NNPC has programmed the delivery of additional 300 million litres in December 2017 and January 2018 to beef up national reserve to 45 million litres per day,’’ he said.
According to him, the delivery is well above the normal consumption requirement of between 27 to 28 million litres per day.
The GMD noted that over the last two weeks, the national truck out capacity had been beefed up to an average of 1,500 trucks, translated to 52 million litres per day.
This, he said was also much higher than the normal consumption of 850 trucks per day across the various depots in the country.
“This is coming at a time when the NNPC is the sole supplier of Premium Motor Spirit (PMS) known as petrol as a result of the inability of oil marketing companies to import due to landing cost and exchange rate,’’ he added.
Baru said that the NNPC had activated the ‘Fuel war Room ‘to coordinate all intervention activities for supply and distribution of the PMS nationwide.
He said that the team in the fuel war room includes NNPC, DPR, PPPRA and PEF with the support of the security agencies.
The group, he said work round the clock to ensure speedy resolution of the current situation.
“DPR, PEF and PPPRA have scaled up monitoring activities to ensure seamless and compliant loading and dispensing of PMS nationwide and to specifically ensure deliveries to designate stations and sale at the approved retail price of N145 per litre,’’ he said.
Commenting on contributions of the nation’s refineries, he said that Kaduna and Port Harcourt refineries have contributed in the quantity of products supply.
He said Kaduna supplied one million litres daily and in all contributed about 16 million litres while Port Harcourt 2.8 million daily and 45 million litres in total.
He said that with the appreciated all stakeholders and urged Nigerian to stop patronizing black marketers as adequate products were available to serve all.
Commenting on allegation by marketers that government wants to increase the pump price due to the high Landing cost, he said such was false.
He said that at present the landing cost of the product is N171 per litre and NNPC sells to marketers at N131.28k.
“You can see that they still have profit. We are advising marketers to shun profiteering and stop suffering Nigerians.
“Government has no plan to increase the pump price, every effort now is to ensure that we handle all the challenges with distribution to avoid the repeat of this kind of situation,’’ he said
Also, Abba Abdu Misua, Zonal Operation Controller, DPR, Abuja said the resources had been given directives to dispense products of any station that defaulted instead of sealing it.