Kachikwu’s fuel scarcity solution is very good on paper

The on-going fuel scarcity which has persisted for nearly two months has clearly tested the resolve and patience of the NNPC and the ministry of petroleum resources.

It has resulted in far-reaching corporate restructuring that saw Nigeria’s vice president and the group managing director of the NNPC reduced to mere filling station attendants. DPR staff started running around filling stations and sealing them off for selling above the regulated pump price.

This kind of dysfunction is the product of disingenuous administrators who are desperate to build a pedestal that would support a lie.

Ibe Kachikwu in remarks at an investigative hearing by the National Assembly on January 4 reeled off three solutions to Nigeria’s perennial fuel scarcity, reiterating that it is shameful for Nigeria to be importing petrol after 40 years, never mind part of his job is fixing the problem.

Wrong solutions

Kachikwu said the first option Nigeria could employ in ending fuel scarcity includes allowing oil marketers to import fuel and sell at their own price while NNPC mega stations sell at N145 per litre.

So how would this work? NNPC has less than 1,000 filling stations in the country and depends on the storage facilities of the oil marketers to store its imported products as well even distribute the product round the country using their trucks.

On the other hand, one of the marketers group, independent marketers (IPMAN) has over 20,000 filling stations spread across Nigeria and Major Oil Marketers Association of Nigeria (MOMAN) and Depot and Petroleum Products Marketers Association of Nigeria (DAPPMA) control key downstream infrastructure. It is still not clear how NNPC would manage distribution when they are rivals.

The second option according to Kachikwu is to create a special foreign exchange concession to oil marketers to enable them import fuel and sell at the approved N145 per litre or a special tax regime for the marketers as a way of incentive to encourage them to remain afloat.

According to the Petroleum Products Pricing Regulatory Agency (PPPRA) price template, the marketers would be given something in the neighbourhood of N240/$1 to be able to sell at the regulated price of N145. But here’s where it gets tricky, what stops the marketers from leveraging the arbitrage opportunity it created and resort to dollar racketeering? Besides, the antecedent of these marketers show they are persuaded more by profiteering opportunities rather than national interest, as would many for profit operation.

Worse still this solution does not in itself eliminate all the challenges with the pricing template. Marketers after bringing in the product pay all sorts of ridiculous fees and charges moving the products around Nigeria. Lagos state charges a tanker fee, police, naval officials and soldiers demand bribes on the road, and other state governments create spurious fees which can still be built into the cost per litre.

Kachikwu further said that the long term solution to the perennial scarcity of the commodity is the fixing of the country’s refineries and that the business model of Petroleum in the country needs to be changed in terms of importation and distribution.

To this end, he said a presidential committee is looking for “how to cushion the effect of higher prices of Crude and lower prices of downstream. It is an 18 months plan before private refineries come into stream from 2019.

“What Nigeria needs is to have refineries working. Selling Crude at raw levels is not good for Nigeria. Dangote and modular refineries are in the pipeline from 2019 and onwards to solve fuel problems or reduce it drastically,” he said.

However Nigeria needs more than that. Nigeria needs its government which is an abysmal failure at governance to get out of the way of markets. Nigeria needs regulations that improve market conditions not harebrained policies devised by politicians who cannot see beyond election cycles. Nigeria needs to deregulate petrol prices, privatise NNPC and shut down the wasteful Petroleum Equalisation Fund (PEF).

Fixing the refineries has been in the works since forever but an import dependent market removes any motivation. The refineries currently perform at less than 20 percent of their installed capacity even after series of Turn Around Maintenance, it is unclear what is going to be done differently to get them back to work.

And counting on Dangote refinery, a private business not financed by public funds to end petrol importation is the equivalent of betting the house on the lottery.

ISAAC ANYAOGU