Petrol Saga: Long Fuel Queues May Last Long As Economy Struggles To Breathe

“There were indications yesterday that the petrol shortage in the country will not end soon, as a $6 billion debt to petrol suppliers, lack of liquidity, and other issues have put pressure on the Federal Government’s capacity to sustain the importation of the product.

“This is even as oil marketers said they had not been able to import the product due to the high foreign exchange rate of $1,500/$, which has increased the landing cost of the product to more than N1,100 per litre.

“Meanwhile, the Nigeria Employers Consultative Association (NECA) said yesterday that the economy continues to struggle due to fluctuations in the foreign exchange market, continued low crude oil production, and a high monetary policy rate that constrained business activity.

“Players in the value chain have adopted measures to maximize the allocation of the available limited supply.

“Under the current arrangement, major marketers, their dealers, and depot owners get the product at about N560 per litre and sell it to independent marketers for between N670 and N680 per litre.

“The independent marketers, who incur the cost of transportation to many parts of the nation, including the outskirts, sell the product to off-takers at between N700 and N900 per litre, depending on location.

“There were long queues at the few filling stations that opened to customers yesterday, while several without the product shut their gates.

“Reacting to the development yesterday in a statement, the Chief Corporate Communications Officer, NNPC Ltd, Olufemi Soneye, stated: ‘NNPC Ltd has acknowledged recent reports in national newspapers regarding the company’s significant debt to petrol suppliers.

“‘This financial strain has placed considerable pressure on the company and poses a threat to the sustainability of fuel supply.

“‘We are actively collaborating with relevant government agencies and other stakeholders to maintain a consistent supply of petroleum products nationwide.’

“The Nigerian National Petroleum Company Limited (NNPC Ltd) also admitted yesterday that it was owing its petrol suppliers a substantial amount.

“The company’s Chief Communications Officer, Mr. Olufemi Soneye, in a statement, said the debt has posed a significant financial strain on NNPC operations.

NNPC’s financial forecast indicates that the total petrol subsidy bill from August 2023 to December 2024 will reach N5.4 trillion.

According to NNPC, the removal of the petrol subsidy in June 2023 initially led to monthly savings of N400 billion for the federation, enabling the company to remit N2.032 trillion in taxes and royalties by January 2024.

However, the NNPC’s costs of importation turned negative in August 2023 and rose to N5.41 trillion by April 2024 because of the devaluation of the naira.

Similarly, the Independent Petroleum Marketers Association of Nigeria (IPMAN) raised concerns yesterday over its members’ exclusion from direct supply of petrol from NNPC Ltd.

The independent marketers said that in the absence of direct bulk supply from NNPC, its members had to source products from private depot owners at exorbitant rates.

IPMAN Public Relations Officer, Chief Chinedu Ukadike, who spoke exclusively to Vanguard, said that until independent marketers, who operate the majority of petrol stations across the country, were able to get direct supply from NNPC, it would be difficult to end the lingering fuel queues that had lasted over two months.

He explained that while petrol products had started arriving at ports in Warri, Port Harcourt, and Lagos, IPMAN members struggled to access the product.

“‘For some weeks now, products have not been supplied to IPMAN members. We have been buying from other tank farm owners and major marketers. But recently, products have started coming in. We are aware that they are receiving products now in Warri, Lagos, and Port Harcourt, and marketers’ barge will soon come out.”

“‘If IPMAN members can holistically be allocated the product, all these issues of profiteering and bottlenecks will be resolved. This is our constraint, and there is nothing we can do but go to other tank farms to see if we can get product from them.

“‘So, we don’t have access to our own petroleum products, and allocations have not been given to us,’ he declared.

Ukadike assured that if the bottlenecks were resolved, there would be products at affordable rates.

Speaking on why the cost of obtaining the product from the private depots was high, he said: ‘The price varies depending on how scarce the product is.

“‘When the product is scarce, the tank farm owners normally sell to their own filling stations. So, what we now do is go to their filling stations, where there will be a surge of trucks waiting to be discharged, to see how we can lobby and pay extra money to get petroleum products.

“‘Likewise for NNPC. Once you go to their filling stations, you will see a surge of trucks, over 6-7 trucks parked by the side waiting to be discharged. So, we are no longer independent marketers; we are now dependent marketers. Independent marketers are not really captured in terms of the distribution chain.’

He explained that before now, it cost about N500,000 to bring a truck from the coastal depots to Abuja but noted that the cost has escalated to about N3.5 million due to the high cost of diesel, truck maintenance, and bad roads.

Oil marketers had recently advocated a reduction in the pump price of diesel to N700 per litre to help improve the distribution of petrol across the country.

The President of the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), Mr. Benneth Korie Doi, stated in Abuja that the high cost of diesel used by trucks was a significant barrier to the efficient distribution of petrol nationwide.

Mr. Doi said: ‘Regarding the prices of Automated Gas Oil (AGO), with Dangote’s refinery production and crude oil transactions in naira, we expect a reduction in AGO prices. NNPC should leverage its shares in Dangote’s refinery to drive down these costs, which will, in turn, lower transportation expenses and reduce market prices.’

He emphasized the need for the government to create a competitive downstream sector in the petroleum industry, arguing that monopolies were detrimental.

“We must foster a competitive environment to ensure the healthy circulation of petroleum products. I commend Aliko Dangote for his monumental contribution to our industry through the establishment of the largest refinery in Nigeria.

This development promises substantial benefits, including enhanced supply, increased competition, and a boost to our national economy and currency.

“‘To ensure balanced distribution, I urge that Dangote’s refined products be made available to a broader range of stakeholders, including NNPC Trading, NNPC Retail, DAPPMAN, MOMAN, IPMAN, PETROAN, and NOGASA. This inclusivity will facilitate sustainable and widespread distribution across the country,’ he said.

“Also reacting to the development in an interview with Vanguard yesterday, the Chairman of the Lagos chapter of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Mr. Joseph Ehimen, said: ‘The sector was deregulated to bring about positive changes. But the changes have been wiped out because of this fuel shortage.

“‘Nigerians are suffering because of limited supply. As operators, we are also facing many problems, including the high cost of moving the product from the depots to the filling stations, maintenance costs, and dues.

“‘We are aware of efforts by NNPC Ltd to maintain the refineries. We need to get them to work as quickly as possible. If all required arrangements are made, Dangote Refinery should be able to assist in ending the fuel shortage because of its huge 650,000 barrels per day capacity.’

Meanwhile, the Nigeria Employers Consultative Association (NECA) has given reasons why the nation’s economy is still struggling, despite its resilience in the second quarter of 2024.

Nigeria’s economy demonstrated resilience in the second quarter of 2024, with a Gross Domestic Product (GDP) growth of 3.19 per cent year-on-year in real terms.

This growth rate surpasses the 2.51 per cent recorded in the same quarter of 2023 and is also higher than the 2.98 per cent growth seen in the first quarter of 2024.

These figures reflect a positive economic trajectory, driven primarily by strong performances in the services and industry sectors,’ the National Bureau of Statistics (NBS) said in its latest report.

However, analyzing the report, NECA’s Director-General, Mr. Wale-Smatt Oyerinde, said in Lagos: ‘The services sector emerged as the leading force behind this growth, recording a robust 3.79 per cent increase and contributing 58.76 per cent to the aggregate GDP.

This sector’s expansion underscores its critical role in Nigeria’s economic fabric, highlighting the importance of continued investment in service-oriented industries such as telecommunications, finance, and real estate.

The industry sector also showed significant improvement, growing by 3.53 per cent in Q2 2024, a notable recovery from the -1.94 per cent contraction in the same quarter of the previous year.

This sector’s turnaround signals a potential revival in manufacturing and construction activities, areas vital for job creation and economic stability. Agriculture, while essential, grew by a modest 1.41 per cent, slightly down from the 1.50 per cent growth recorded in Q2 2023.

This indicates a need for strategic interventions to enhance agricultural productivity, especially considering the sector’s crucial role in ensuring food security and providing livelihoods for millions of Nigerians.’

On foreign exchange, he said: ‘The volatility in the foreign exchange market remains a significant challenge. The depreciation of the naira has resulted in increased costs for businesses, especially those reliant on imported raw materials and equipment.

This has, in turn, led to inflationary pressures, eroding consumers’ purchasing power and dampening overall economic growth.

Additionally, the low crude oil production levels, coupled with fluctuating global oil prices, have constrained Nigeria’s foreign exchange earnings, making it difficult for the Central Bank to stabilize the naira.

“‘The Central Bank of Nigeria’s decision to maintain a high monetary policy rate has also had far-reaching implications for businesses. While it is aimed at curbing inflation, it has inadvertently raised the cost of borrowing, stifling investment and hindering business expansion.

To navigate these economic challenges, the government and private sector must work closely together. By addressing the key issues highlighted in this analysis, Nigeria can build a more resilient and prosperous economy,’ he concluded.

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