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Measures To Effectively End Petrol Scarcity Without Recourse To Subsidy Payment



Few people are aware of the efforts and sleepless nights being expended by the president and some of his aides, particularly, the Chief of Staff, the Minister of State for Petroleum and the GMD, NNPC, to bring the persistent fuel scarcity to an end. This is why I feel it’s a duty for me as a citizen with little experience in the petroleum sector to once again offer some suggestions on how to effectively tackle this menace once and for all.

For emphasis, I have actually predicted and warned about recurrence of fuel crises and even advised the then incoming administration about the need to take proactive measures so that Nigerians will never have to experience fuel crisis in times of peace again. This I did by submitting a memo to the transition committee a few weeks before the swearing-in of President Muhammadu Buhari and another memo a while after the removal of subsidy. But I understand that my memo couldn’t get the required attention due to the heavy workload faced by the transition committee.

To understand why we are here now, we must reflect to the time when subsidy was stopped by this government with the subsequent increase of petrol price to N145 per litre. As at then, the international prices of crude were hovering at low prices of between 35 and 48 dollars per barrel. The price of N145 per litre was arrived at against those low prices of crude.

But instead of us to be proactive and plan ahead for the eventuality of price increase that will definitely follow any dramatic rise in the international prices of crude, we seemed to have relaxed or assumed that the status quo will remain, until now that recent developments have made us to run helter-skelter looking for solutions.

The landing cost of imported petrol now is around N171 naira per litre. This means that for our demand to be met, and the product to be sold at N145, the government must be ready to subsidize it by at least N35 since no one expects the marketers to import and lose such figures. On the other hand, such payments will add a huge burden to the government finances, plus the fact that similar abuses of the subsidy programme of the past will be repeated.

The second option is the total removal of subsidy and the total deregulation of the sector to allow the marketers to import and sell as the market dictated. This will automatically increase prices to around N185 to N195 per litre. This option itself is undesirable for obvious reasons. One, it will further erode the purchasing power of Nigerians, and bring untold hardship to the populace. It will also cause inflation and its attendant effects.
With the above options, we can understand the dilemma of the PMB administration which has already lost a lot of goodwill and support from the populace. This must be why the Minister of State, petroleum has come with a 3rd option of dual price whereby the NNPC will be selling at N145 naira per litre while the marketers will be allowed to import and sell at higher prices to cover their cost. This option remains the best temporary measure to end the crises at the moment even though it has many flaws on its own. It was also one of the options I recommended to the government in 2015. If adopted, fuel queues will disappear nationwide within a maximum of 2 weeks and even the marketers will be forced to sell at the lowest possible price due to competition and the alternative of the NNPC product being sold at N145 naira. There is also the possibility that the higher price will eventually come down to match with the lower price at N145 or less, in the event of lower crude prices.
Of course, permanent solutions to fuel crises remain the rehabilitation of the refineries, NNPC jetties, tank forms and pipelines, as well as take-off of new private refineries. This will eliminate a lot of costs attributed to importation of the products like freight, forex, foreign taxes, and profits. This simply means that if we are locally refining our crude the per litre price of petrol can be maintained at 145 naira or even lower without paying any subsidy.  It will also reduce the influence of the so called oil cabal dominating the industry. (This is a topic for another day). But the permanent solution may take 2 or more years to be achieved. So in the interim, the dual price regime is the best option.

However, measures must be taken to minimize the diversion of the cheaper NNPC product to the marketers that will be allowed to sell at higher prices. This is the multi million Naira question which I believe I have some suggestions that can definitely minimize diversion to the lowest level.

Distribution and Monitoring
Like with every dual price regime, there will always be pressure on the lower price and the diversion of the product to be sold at the higher price. The truth is that the current system of distribution and monitoring by NNPC and other agencies need to be revisited and some measures adopted to bring about more transparency and harmony. For both security and strategic reasons, I will reserve some recommendations here and submit them directly to the relevant government agencies.

However, I must state here that the NNPC need to revamp and utilize its pipelines and tank farms, most of which are actually in good shape. For instance, no one can convincingly explain why the atlas cove is not being utilized years after it has been bombed and repaired. The over dependence of NNPC on private tank farms and jetties only feed the rumour that there is a cabal holding the nation to ransom. NNPC has more storage capacity nationwide than the combined total of all private depot owners. 21 large tank farms across the nation all connected to the refineries and jetties by a network of pipelines. Yet it pays a large chunk of it’s resources to private depot operators while leaving it’s own depots dry. Some of these private depots operators engage in dibersion of the products in their custody. The activities of pipeline vandals and saboteurs on inland pipelines are minimal and can be contained with less resource than what is being paid to the private depot owners. Besides, if NNPC keeps the same product it intends to sell at low prices, in the same facility where the private owner is allowed to sell at higher prices, we don’t need any expert to tell us what will happen.

Nura Usman Almajir, A former PRO of IPMAN Kano Zone. Writes from Abuja



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