For
some time now, especially since the beginning of 2015, Premium Motor
Spirit popularly known as petrol has been very scarce in Abuja and many
other cities across the country. I live and work in Abuja and can count
the number of times I have got fuel at the official rate of N87 per
litre since the year began. Of course, for those who do not attach much
value to time, they do not mind queuing for hours on end at the few
filling stations that are selling at the official rate. For some of us,
we have embraced buying at the black market even if we have to pay twice
or thrice the official price.
I have tried to conduct a
preliminary study as to the root causes of the perennial scarcity of
petrol in Nigeria. What I found out is mind-boggling. The problem came
to being largely as a result of the non-maintenance of our oil
refineries. Nigeria currently has five of them. Two in Port Harcourt;
the old refinery inaugurated in 1965 with the current nameplate capacity
of 60,000 barrels per stream day and the new refinery inaugurated in
1989 with an installed capacity of 150,000 bpsd. This brings the
combined crude processing capacity of the Port Harcourt Refineries to
210,000 bpsd.
There is also the Niger Delta
Petroleum Resources, a 1,000bpd topping plant located at Ogbelle, Rivers
State, which was established to produce diesel. The other two
refineries are in Warri and Kaduna. The Warri Refinery was established
in 1978 to refine 100,000 bpsd and was expanded in 1987 to 125,000 bpsd.
The Kaduna Refinery was commissioned in 1983 with a nameplate capacity
for 110,000 bpsd. These refineries produce varieties of products
including Liquefied Petroleum Gas, Premium Motor Spirit, Kerosene
(aviation and domestic), Automotive Gas Oil, Low Pour Fuel Oil and High
Pour Fuel Oil, among others.
According to the National Public
Relations Officer of the Petroleum and Natural Gas Senior Staff
Association of Nigeria, Comrade Emmanuel Ojugbana, “The refineries have
on many occasions suffered from irregular Turn Around Maintenance. While
TAM is required once in every 18 months, the refineries have been
without TAM for almost two decades and this has caused serious problem
for their operations.”
Invariably, lack of maintenance culture
on our refineries and petro-chemical companies led to fuel imports. Fuel
imports led to the introduction of fuel subsidy which was meant to be a
stop gap or temporary measure pending the time our refineries could
operate at full capacity and when privately licensed companies would
have completed the construction of their own refineries. Alas, the Dr.
Kalu Idika Kalu-led National Refineries Special Task Force while
presenting its report to President Goodluck Jonathan in November 2012
observed that 28 out of the 35 investors given licences by the Federal
Government to establish refineries in the country lacked the capacity to
do so. The Idika committee reported that to ensure self-sufficiency in
petroleum products’ production, the country needed three more refineries
that should be established either by the government or private
investors. The refineries, the committee suggested, should be
established in Lagos, Bayelsa and Kogi states.
Information
gleaned from the website of the Department for Petroleum Resources
showed that out of the six private refineries which would have added a
cumulative 657,000 bpsd to the local refining capacity, only the Niger
Delta Petroleum Resources, a 1,000bpd topping plant located at Ogbelle,
Rivers State, is operational. What this means is that for some time to
come, Nigeria will continue to import refined petroleum products.
The
challenge successive governments have been facing is whether to
subsidise the cost of the imported petrol or leave the price to be
determined by the vagaries of demand and supply. In plain terms, the
crux of the matter is whether government should deregulate the petroleum
industry, particularly the downstream sector. Over the years, I have
held the view that deregulation is not pro-poor and that subsidy is
needed to cushion the harsh effect of the partial deregulation of the
Nigeria’s oil and gas sector.
But recent developments have shown
that full deregulation might be the only way out of the fuel scarcity
quagmire. As things stand, the fuel subsidy scheme is riddled with a lot
of scams as importers of petroleum products have been found to engage
in all manner of sharp practices. Even as it is, government is finding
it difficult to pay genuine claims. In a May 14, 2015 report by this
newspaper, it was observed that the lingering fuel scarcity was
occasioned by the delay in the payment of the subsidy claims. According
to the records made available by the marketers, they had received
subsidy of N98bn in Sovereign Debt Notes, interest of N56bn for delayed
payment and N37bn as foreign exchange differentials, bringing the total
payment in 2015 to N191bn since the beginning of the year.
Their
records also show that the outstanding balance expected from government
as of March 31, 2015 is N200bn. But while the marketers put the
outstanding claims at this amount, the Minister of Finance, Dr. Ngozi
Okonjo-Iweala, said the outstanding figure was N131bn. In the recently
passed 2015 budget, only N100bn was budgeted for petrol subsidy and
N45bn for kerosene subsidy. This is far less than what the outgoing
government currently owes the petroleum importers.
The report
establishes that “When subsidy payment is delayed, huge interest
accumulates on funds borrowed by the marketers to fund importation of
products in addition to huge exchange rate differentials arising from
the difference in exchange rate when the cargoes are imported and the
time the subsidy claims are paid.”
I couldn’t agree more with
the opinion expressed by the President, Nigeria Association for Energy
Economics, Prof. Adeola Adenikinju, that there is the need for the
Federal Government to discontinue subsidies on petrol consumption and
look into subsidising production of petrol and other petroleum products
locally. The scholar opined that it was more economically viable for
government to encourage businesses that want to invest in local refining
of crude oil and that it was very pressing that the country phased out
subsidy because of its huge negative impacts on the country’s foreign
reserves, exchange rate, inflation and the budget.
Given the
expert’s opinion that subsidy payment encourages fraud, fuels waste of
scarce resources and causes frequent scarcity of products due to
government’s inability to fulfil its own part of the obligations,
shouldn’t every right-thinking Nigerian support the full deregulation of
the oil sector? Truth be told, the sector is at present unofficially
deregulated. As I travelled from Abuja to Bogoro, Bauchi State over the
weekend, I noticed that at the six different filling stations we fuelled
our vehicle along the way, we bought fuel at different prices ranging
from N120 per litre to N135 per litre. In all of these filling stations,
there were no queues as consumers there had adjusted to the realities
of buying above the official rates. My support for the full official
deregulation of the oil and gas sector does not in any way preclude the
trial of those who have defrauded the country through various scams in
the sector. It does not mean that government should not pursue the
turnaround maintenance of the existing refineries or their outright
privatisation, if necessary. I am for whatever measures that will make
this great country to cease importing refined petroleum products. Enough
is enough!
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