Nigeria’s petrol supply system is evidently broken under the weight of immense corruption and there is no better time to end it than now. The only sensible test for any government policy is if it delivers to the people. This one does not and has never served the good of the people since this government came to power. Evidently, it is only sustained at the indefensible insistence of President Muhammadu Buhari.
As has often happened in the past, Nigeria is now in the throes of a nationwide petrol shortage that dislocates the economy and leaves Nigerians in bitterness daily. But the farce of a subsidy-maintained supply system is creating its own legion of over-night millionaires and making the billionaires among them ever wealthier at the expense of ordinary Nigerians across the country.
The government’s oil company NNPC is the sole importer of petrol under a warped DSDP, a phantom arrangement under which a handful of favoured oil firms lift crude oil and are then meant to bring back into the country the same value in refined products. Initially, the arrangement was also meant to deliver diesel to the country. Its major failure is in its opaqueness.
NNPC has never provided audited reports of this arrangement. But that is not the only failing. THE DSDP has for long been unable to ensure good quality petrol supply to stations all over Nigeria and now the strain on it has left it broken and of no use whatsoever.
The current petrol shortage is traceable to several factors, but the more glaring is the failed subsidy regime which means Nigeria has become the primary supplier of petrol to many countries around the West African sub region
Buhari needs to understand that by this policy, his government is not serving the people of Nigeria, but he is illegally lining the pockets of petrol suppliers who are milking the people dry.
Five months ago, the House of Representatives Ad-hoc Committee investigating the daily consumption of Petroleum Motor Spirit (PMS) in the country demanded details of the oil consortium involved in the Nigerian National Petroleum Company (NNPC) Limited, Direct Sale Direct Purchase (DSDP) arrangement. Nothing has been heard of that probe since then and not many expected much out of it, anyway, given the oily nature of the business.
The DSPD contracts are not for small boys. In 2019 for instance more than 130 companies submitted bids for a tender process that supposedly comprised technical and commercial bid submission respectively, evaluation and shortlisting, then commercial negotiations with prequalified companies and engagement of the successful consortia/companies by NNPC.
At the end, fifteen (15) consortia/companies were selected to offtake crude oil and in return, deliver corresponding petroleum products of equivalent value to NNPC, subject to the terms of the agreement. A 2019 NNPC data says since the inception of the DSDP scheme in 2016, about 29.5 million metric tons (39.6 billion litres) of petroleum products have been supplied under the scheme, representing over 90 per cent of the national requirement.
The controversial policy and the related subsidy regime which this government continues to maintain were meant to assure supply and at the same price all over the country. To sustain the equal price regime, the government through the petroleum equalization fund, PEF levies motorists but the fund is broken, and it is today owing billions in unremitted cash to major oil dealers who are now canvassing the end of PEF as provided in the petroleum industry act, PIA.
The current petrol shortage is traceable to several factors, but the more glaring is the failed subsidy regime which means Nigeria has become the primary supplier of petrol to many countries around the West African sub region. Marketers blamed the current shortage on the huge increase in demand of petrol from across the border and the massive smuggling that is required to meet this demand from neighbouring nations.
BusinessDay learnt that Petrol dealers now make up to N6m in illegal profit when they take a full tanker of petrol across the border. This is not the only quick business they do. A dealer who loads a full tanker at any of the 21 petrol depots in Lagos now drives that tanker far into the hinterland where he can make as much as N3m per each of a 33,000 litres truck. So, there is such a huge incentive for dealers to move the petrol outside of Lagos into other states or for the daring ones to take it across the border.
That is not all. As with monopolies, NNPC is unable to fully meet the demand for petrol. According to investigation by our reporters, NNPC brings petrol via land ocean tankers commonly called in Nigeria mother vessels. For the petrol to reach the depots, small vessels must be sent out to load fuel from these mother vessels and then supply the depots in an arrangement called STS, meaning supply to shore.
There have been times lately when the marketers have been told to hire their own small vessels for this supply to shore. Problem is that cost of hiring the small vessels has doubled to $50,000 daily and they must be hired for a minimum of ten days. Marketers have burnt their fingers in the process for you can hire the vessel and then end up not picking fuel for various reasons.
Without predictable margins, the markets are being mindful of engaging in this costly endeavour, so while you read bogus reports of NNPC ordering petrol, the consignment could be held up in the high seas because there are no small vessels shuttling to and from the petrol depots in Lagos.
As the rot continues, Nigerians have endured the misery of spending the Christmas without petrol and the situation is now getting worse amid government flip flops. Last week, word leaked that the government had approved a slight upward adjustment in petrol price.
It was not that this could move the needle, but it seemed to have signaled a movement towards cutting and ultimately ending the subsidy regime. But the government has since disowned the reports of an increase. While this lasts, motorists are finding petrol stations located on the same street, but which sell the product at different prices. Expectedly, the stations with the higher price always have petrol and their queues are shorter.
