As Fuel Scarcity Heightens Pressure to End Subsidy Scam

The resolution of the impasse on fuel distribution and pricing at the weekend, notwithstanding, oil industry analysts believe that without ending the subsidy scam with immediate effect, Nigerians will continue to postpone the evil days and suffer amid plenty, writes Festus Akanbi

After a protracted fuel shortage, which brought in its wake indiscriminate pricing, hoarding and untold hardship to the people, one will understand why Nigerians heaved a sigh of relief at the weekend when the federal government finally took some practical steps to end the imbroglio.

The relief was coming more than 48 hours after the Department of State Services (DSS) gave all stakeholders in the fuel supply chain to restore a normal supply of petroleum products at an officially approved rate across the country or be ready to face the consequences of their actions. And from initial reports from our correspondents in many states of the federation, the situation seems to have improved, due to the partial compliance of oil marketers.

Some marketers, who spoke with our correspondents in Lagos, however, dismissed the DSS’ threats, explaining that the security organisation was merely playing to the gallery given the difficulty in getting the products from the Nigerian National Petroleum Company (NNPC) Limited’s depot.

They wondered what would happen to NNPC officials since most of their outlets in Lagos and Abuja did not open for business for many weeks because they did not have any products to sell.

New Benchmark?

Last week, NNPC adopted new measures aimed at guaranteeing adequate fuel supply across the country, by fixing N148 per litre as the price for lifting petrol at depots. It also agreed to supply outstanding stock to independent oil marketers, to end product shortage.

In the same week, a meeting was held between NNPC, marketers and all the stakeholders, where the issues were resolved.

Product Lifting Resumes

Consequently, the Operations Controller, of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Mr. Mike Osatuyi, who confirmed the development, said: “Our members have now been allowed to lift petrol at N148 per litre, meaning that we can now reduce our pump prices. We are committed to working with other parties to tackle the shortage across the country as quickly as possible.”

Meanwhile, the National President of the IPMAN, Chinedu Okoronkwo, in an interview explained that the demand of the union to buy the product directly from NNPC at the controlled price of N148.19 had been acceded to.

Okoronkwo stated that he had confirmed that Nigeria has at least 1.9 billion litres of petrol in stock, stressing that the meeting with the DSS and other stakeholders was helping to solve the problem and clear the queues.

According to him, the direct purchase from NNPC depots, rather than from third parties, has made fuel available in Abuja and some of the other states and will eventually get normal in other affected states.

He stated that when the Port Harcourt refinery begins to work by the first quarter of 2022, and when Dangote comes on stream thereafter, there will be more improvement in Nigeria’s fuel supply chain.

Okoronkwo stated that the government was cognisant of the coming elections and how scarcity may affect voters if the problem is not sorted out soon and therefore needed to do everything to solve the prolonged shortages.

“The availability has been confirmed and it’s 1.9 billion litres. Now the NNPC has taken it upon itself to allow marketers to purchase directly from them. And they have given us about 350 trailers and we believe that the problem will clear and it will continue in that manner,” Okoronkwo assured.

He added that the private depot owners who also own filling stations can now decide to use their stations as outlets, stressing that IPMAN was not against their business.

“There is a template of N148.19. The depots are just like warehouses of the NNPC because it’s the NNPC that brings in these products,” he added.

Legislative Intervention

Also last week, the House of Representatives called on NNPC to end the lingering scarcity of petroleum products in the next week to ease the suffering of Nigerians.

The House also called on Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) to seek the collaboration of the Nigerian Police Force and DSS to ensure that fuel was sold at the regulated price and in all retail outlets.

The resolutions followed a motion entitled: “Urgent Need for the Government to End the Current Fuel Scarcity,” moved by Saidu Abdullahi (Niger State) under matters of urgent public importance at plenary.

Sharing Formula

Although Nigerians might have sighted a few fuel-laden tankers along the road, IPMAN believed the relief may be temporary until the body is assigned a larger chunk of petrol imported by the NNPC.

For instance, IPMAN Public Relations Officer, Mr. Chinedu Ukadika, last week urged the NNPC to allocate 60 per cent of petrol imported into the country to independent marketers at the official rate to end the perennial scarcity in the country.

Ukadika said the wide networks of independent marketers make them the perfect outlets to ensure sustained distribution of petroleum products across the country.

While applauding the management of NNPC for ensuring that the independent marketers had access to the product in the past few days, he noted that for supply to normalise, independent stations must be given priority.

Fuel Subsidy: Now or Never

However, the current situation has reignited the call for the immediate stoppage of the fuel subsidy regime as analysts believe that a permanent situation to the recurring oil scarcity crisis cannot be achieved as long as the controversial policy of oil subsidy continues.

According to a newspaper editorial, despite the humongous fuel subsidy bill, petrol is not available for all and there is no predictability of its availability across the federation.

“There is a price per litre for PMS as announced by the NNPC and the Ministry of Petroleum Resources. The rule is that all marketers are supposed to lift fuel from depots at a controlled price and to sell to Nigerians across the federation at the same price at filling stations. Over the last couple of years, the truth is that dispensing fuel from the pumps at the official price is only done in Abuja, Lagos and a few states in the South-west region of Nigeria,” the report said.

The report pointed out that in the South-east, for instance, petrol is sold at filling stations for N250 per litre, saying no one raises an eyebrow, not even NNPC or task force or any authority disturbs, seals off, or prosecutes any marketer for selling at this price. In other parts of the federation, prices are fixed by marketers and no one complains.

From available reports, the marketers are insisting that they are not buying at the controlled price from the depots; that the increased pump price is a response to the market stimuli based on what they buy from the depots.

“In all these litres, officially sold at N250, NNPC still claims the same margin of subsidy. Thus, the taxpayer is cheated, the system is defrauded and the petroleum authorities get enriched at the taxpayers’ expense,” the report said.

Analysts argued that apart from the perennial fuel scarcity in many parts of the country, the subsidy programme is haemorrhaging the Nigerian economy because of the opaque nature of the way it is being handled.

It would be recalled that in the presidency days of former President Goodluck Jonathan, NNPC was reported to have been remitting about $ 3 billion per month to the federation account for sharing by the three tiers of government. However, there are reports that since January 2022, it has hardly remitted anything to the federation account. All kinds of excuses have been advanced by the NNPC for this despite months of increased prices of crude oil in the international market.

Apart from this, fuel subsidy for the first six months of 2023 is projected at N3.36 trillion, when translated to US dollars, this will amount to $ 7.71 billion. Analysts said for 2022, we will be ending up with not less than N5 trillion in the phantom subsidy.

According to newspaper reports, the official position is that subsidy has ballooned from 35 million litres a day in 2015 to the present 68 million litres. It is common knowledge that subsidy claims are usually inflated, with companies claiming petrol supplies that were never imported, with ships that were nowhere near our waters.

Oil industry watchers believe certain officials of government benefiting from the way the subsidy programme is being run are behind the reluctance of the current administration to finally remove the policy.