Nigeria: Fuel scarcity -- the untold story

Dec 24, 2009 01:00 AM

The Nigerian National Petroleum Corporation (NNPC) and marketers are pointing accusing fingers at each other over the lingering fuel crisis; but who is responsible for this?
Why fuel crisis again? This is the question gaining currency in Nigeria. Investigation reveals that the Nigerian National Petroleum Corporation (NNPC) and marketers have shares in the blame.

An investigation to the Suleja depot in Niger State reveals that marketers have devised a way of raking huge earnings from the crisis and thereby frustrating any meaningful efforts of the government.
A marketer who is sympathetic with Nigerians over the situation told that marketers have diverted and buried tanks of fuel with the expectation that the prices will go up. Sources in government have also told that the much dreaded deregulation will be "unleashed". He said the NNPC is making available products but that the marketers are responsible.

"To be sincere we are responsible for this crisis. We have succeeded in throwing Nigeria into this situation just because we want to make excess profit from our business. I know a marketer who buried 35 tanks in the bush and yet he prays to God every day," he added.
Secondly, some of the marketers now sell directly to "organised black marketers", who then dispensed to the unorganised ones at what they described as reasonable prices. For them business is booming. What a nice way to end the year! But for most Nigerians the beauty of the season has since gone with the wind as they queue up to buy fuel.

Even then, there is an accord that the problem of fuel scarcity in the country cannot be divorced from the abysmal performance of the nation's refineries which has necessitated increasing importation of product.
The level of crude oil that can be processed by these four refineries is less than 60 %. That is if they are working at optimal level, leaving the country with no option than to import the rest to feed its population. Nigerians consume 32 mm litres every day and the NNPC says the 15 newly licensed companies are not importing yet.

But the successive administration in the country had ignored the Turn Around Maintenance (TAM) of these refineries to guarantee their efficiency. This attitude as well as the frequent vandalization of pipelines by militants made the country depend on importation of the product as Nigeria currently bring in over 90 % refined products from abroad.
According to the Department of Petroleum Resource (DPR) report, the average crude oil received from the four refineries between July and September this year was 3,403,432 barrels, while the average crude oil processed was 2,725,221 barrels. The average performance of these refineries was 6.66 % during the period under review.

This development explained why the Federal government through the Nigerian National Petroleum Corporation (NNPC) in September placed order for 90 cargoes of Premium Motors Spirits (PMS) and 28 cargoes of Dual Purpose Kerosene (DPR) between now and 2010. Also the government saidit ordered for 10 cargoes of Automotive Gas Oil (AGO) within the same period.
Acting Director of Department of Petroleum Resources (DPR) Billy Agha, who disclosed this in Lagos at a meeting with petroleum marketers said the importation of petroleum products is designed to cater for the country's ever increasing consumption.

"NNPC has indicated that their coverage of the market is premised on the fact that there may not be supplies coming from third parties, while assuring sufficient and robust supply of the indicated products within this critical period."
"If we recall, the local production of petroleum products has generally continued to fall as the refineries are operating under very low capacity utilization. We are happy to note that the NNPC has given assurance to restream the Warri and Kaduna refineries ahead of the 2009 festive periods and year end holidays," he said.

To bolster supply of product, the government recently granted licences to marketers to import the product in to the country. This later proved to be inadequate to solve the situation as fuel scarcity reoccurred in some part of the country, including the North and partly due to the industrial action embarked upon by the Petroleum Tanker Drivers.
Although the NNPC, through its spokesman, Dr Levi Ajuonuma, said recently there is petroleum sufficiency for over forty days that would serve the country all through the Christmas holiday season and thereafter, but the ongoing queues in the country proved otherwise.

Another reason for scarcity in the country is the non-importation of products into the country by marketers. Spokesman of the Major Oil Marketers Association, however explained that his members did not deliberately chose not to import as they are being confronted with credit crunch because the banks are not lending.
"The banks are not too willing to fund fuel importation because of the strict credit guidelines of the Central Bank of Nigeria. Although we have a cargo that has just arrived, I can tell you we have not been importing much so far."

He said the Federal government was still owing them arrears of subsidy claims, which has affected their business in recent time.
"Although government has paid most of the subsidy claims, batches H and I are with the Ministry of Finance for payment," he said.

But the Central Bank Governor Sanusi Lamido Sanusi said that the banks are lending and that there was nothing to fear.
In his view, the Executive Secretary of Major Oil Marketers Association of Nigeria (MOMAN), Obafemi Lawore said inadequate planning was responsible for the perennial fuel scarcity. According to him, the timing of issuance of licences to import petroleum product was flawed, while some other technical impediments such as financial hiccups in the banking industry and remittance of the backlog of the Petroleum Support Fund (PSF) were contributory factors.

Lawore said the major marketers just discharged 18 mm litres of petrol at Apapa jetty while it expects about four more cargoes before the end of December. He said its members' stock in Apapa has now improved from three to five days, which amounts to about 49 mm litres.
The product is expected to be extended to Oando, Mobil, Total, African Petroleum (AP), Nipco, Chevron and Conoil filling stations any moment from the discharged period, he said.

Lawore exonerated the marketers from the fuel crisis and criticized the NNPC heaping the blame on MOMAN. According to him, the NNPC is making conflicting statement and not addressing the matter as it should be.
He said: "They claim to have enough stock that would take us till January ending. So why are they now changing the statement that the scarcity is because people are not importing? The truth is that I don't believe they have the acclaimed 41 days stock. If you look at the situation within NNPC depots, you will find out that besides the coastal depots, there is no depot in the North that works, so if they have 41 days product, where are they keeping it? And if they have stocks on the high sea, that should not be counted as holding stocks, because it is yet to arrive."

Professor Pat Utomi blamed the crisis in the sector on the centralization of the NNPC, saying the development is responsible for the level of corruption in the organization.
Tunji Adedeji, former President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), believes that the current scarcity and associated energy ills in the country could be solved by deregulating the sector. According to him, deregulation would ensure availability, affordability and efficient channel of distribution of petroleum product, contrary to what is currently being experienced in the country.

An energy expert, Samson Adewale, told that the channel and management of petroleum product is leaking and believed that the passage of Petroleum Industry Bill currently before the National Assembly would restore things to better shape.
Whatever the case, experts say this is not the time to apportion blame only. It is a moment of action. They say the nation's economy is seriously ill.

Source / Daily Trust
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