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Can the lingering fuel crisis work against President Muhammadu Buhari’s second term ambition in the general election in 2019? 

By Anayo Ezugwu

Fuel crisis is still lingering in Nigeria more than one week after the Nigerian National Petroleum Corporation, NNPC, assured Nigerians of availability of the product. Motorists are still queuing for hours at the filling stations to buy fuel.  Realnews observed that most filling stations are without fuel including the ones owned by the NNPC. This invariably indicates that the NNPC and federal government are not telling Nigerians, especially the masses who suffer a lot of hardship, the truth about the fuel supply situation in the country.

The federal government led by President Muhammadu Buhari may have its reasons for not being forthright majorly because of its anticipated negative reactions of the masses which could be politically disastrous as the general elections comes in 2019.  Buhari, who is being touted to have a second term ambition, is obviously more aware of what could happen should he admit the truth about the real challenge the nation is having with importation of fuel. He appears to be in a dilemma to take the necessary action that will permanently solve the fuel supply challenge which is total deregulation of the downstream sector to allow private sector take absolute control. Should deregulation happen, it means that the pump price of fuel will go up once more. This is a risk the government does not want to take having already increased the pump price of fuel from N87 to N145 per litre in 2016.

Apparently, the risk of losing an election should the masses revolt against the government because of another hike in the price of fuel must be too high and that is why Buhari as the defacto petroleum minister has failed to act decisively to arrest the situation. He has refused to take responsiblity and has put the problem squarely on the shoulder of Ibe Kachikwu, minister of state for petroleum resources and Maikanti Baru, group managing director of NNPC to resolve. Both Kachikwu and Baru are not agreed on the necessary action to be taken to end the fuel crisis.

The Baru-led NNPC had assured Nigerians that there would no longer be fuel scarcity which had caused unbearable hardship for Nigerians, especially during the festive period.  The group managing director had condemned the fuel shortage, describing the corporation’s downstream counterparts as unpatriotic. But Kachikwu unrelentingly pushes for the real deregulation to enable major marketers start importing fuel. Baru thinks that marketers the one sabotaging the government effort to normalise the fuel situation in the country.

As at January 9, Baru said: “I am happy that this problem has been dealt with and the few pockets of non-compliance have been tackled. It was unfortunate that due to the behaviour of a few bad eggs, the Christmas was a pain. We hope you will never be part of this incident and we also hope this type of thing never happens in the future. NNPC is determined that this year there will be no fuel shortage. Definitely we have seen the last of it,” he said.

Prior to this, the NNPC had on Sunday, December 24, 2017, disclosed that the landing cost of fuel is N171 per litre, meaning that N145 per litre selling price is unrealistic and no marketer will want to import and sell at the regulated official price. It also means that the corporation is currently paying a subsidy of N26 per a litre of fuel. Baru explained that cost, insurance and freight price of fuel was $620 per metric tonne, adding that at N305 to a dollar the landing cost translates to N171 per litre.

However, Baru promised Nigerians that despite the higher landing cost, there was no plan to increase the price of the commodity, adding that the N145 per litre price was guaranteed. He also noted that despite the actual landing cost, marketers were being supplied the product at N133.28, giving them an ample opportunity to make a profit.

Mathematically, the revelation from Baru means that there is a subsidy of N26 per a litre on the estimated 30 million litres consumed daily in the country. This means the corporation spends more than N700 million every day on subsidy. Critics of this arrangement are wondering how long NNPC would continue to subsidise fuel without running into bankruptcy. Although some critics argued that the corporation should not be short of cash since it sells its daily allocation of 450,000 barrels to fund its imports.

Another scenario being painted is that the federal government  is secretly funding the subsidy without the knowledge of Nigerians? This might be one of the reasons why Vice President Yemi Osinbajo distanced the government from sanctioning the current subsidy regime.

According to him, it is the NNPC that pays for the fuel subsidy that has emerged with the N171 landing cost as against the official retail price of N145. He stated that since the NNPC buys the fuel, it bears the cost, noting that one of the most important objectives of the Buhari administration is to ensure that the average Nigerian citizen is not again put through the pain of an increase in fuel price.

As it stands, price deregulation would be a dangerous gamble for any government in power especially the All Progressives Congress, APC,-led federal government ahead of 2019 general elections because the price of petrol would inadvertently lead to increase in cost of living.

Again, admitting to paying subsidy will equally be a disastrous gamble for the government because the 2012 subsidy scam is still fresh in the minds of Nigerians.  None of the alleged culprits of the fuel subsidy scam has been brought to justice.

However, since petrol price determines the cost of transportation and ultimately food prices, the Buhari government would like to maintain a relatively low and stable petrol price due to political consideration ahead of 2019 general elections. Moreso, the APC had made a campaign promise  to reduce fuel price in 2015. Then the party promised Nigerians that petrol would be sold for N40 per litre as against prevailing N87 compared to now that the product sells for N145 with supply shortages being experienced.

Currently, there is no official report on net subsidy payments for 2016 or, indeed, for 2017. It is undeniable, however, that the subsidy component on N145/litre petrol will rise, as crude oil price rose to $71 per barrel on Thursday, January 18. That means refiners would like to sell at prevailing price.

This, perhaps, is why Kachikwu is mulling a plural fuel pricing regime. Under the arrangement, the NNPC would sell at N145 while independent marketers would import and dispense at their own rate.

In his presentation to the meeting of the Joint Committees on Petroleum (Downstream) in the National Assembly earlier in the month, Kachikwu said a committee he heads was considering three options to allow marketers join in the importation of petrol. The options being considered include a regime of flexible tax-waiver window to accommodate the extra cost elements in the fuel pricing template, introduction of an exchange rate modulation programme, and price plurality regime to allow marketers sell at different price from the NNPC.

The first will include some form of tax waiver for marketers that import petrol or sell at the government regulated price. The second involves the Central Bank of Nigeria, CBN, selling foreign exchange to private petrol importers at a rate lower than the normal price while the third involves marketers being allowed to sell petrol at a different, most likely higher price, than the NNPC. This option is feared will lead to round tripping of foreign exchange.

Also, the minister later clarified that the third option does not mean that government plans to increase fuel price above N145 per litre. He, however, said the options would support the NNPC’s effort to stabilise products supply and distribution. “These measures would pave the way for marketers’ participation in the fuel import regime to guarantee seamless supply and distribution of petroleum products across the country within an 18-month corridor, ahead of the eventual attainment of local refining capacity,” he said.

But that itself does not give some Nigerians confidence. For instance, Yakubu Dogara, speaker of the House of Representatives, expressed his frustration with the fuel crisis, accusing the executive arm of betrayal.

Dogara expressed the determination of the House to investigate the lingering fuel scarcity and the alleged re-introduction of fuel subsidy in the country. The speaker bared his mind as he welcomed members of the House of Representatives from the Christmas and New Year break, on Tuesday, January 16.

While describing the problems as daunting, Dogara said the unending fuel shortage recorded in the country in December 2017, reached an unbearable level. “The House expects that with the cooperation given to the executive arm to increase fuel price from N87 per litre to N145, based on the assurances, fuel scarcity ought to be a thing of the past.

“We were also assured that fuel subsidy had come to an end. From recent developments on this subject, except the executive adduces compelling reasons why the reverse is the case, we will be justified in feeling betrayed. As a parliament, we must unravel the causes of this scarcity and the alleged re-introduction of fuel subsidy,” he said.

In his reaction, Obafemi Olawore, executive secretary, Major Oil Marketers Association of Nigeria, MOMAN, said rather than returning subsidy or increasing fuel price, the government should support the options proposed by Kachikwu. But he warned that the options would only work if certain measures were adopted to curb corruption and abuses.

Olawore, who said he was expressing his personal view and not that of MOMAN, said some of the measures included establishing an independent committee that would report to government at regular intervals. “I agree the options point the way forward. First, a monitoring committee comprising the Central Bank of Nigeria, CBN, Finance Ministry, representatives of the marketers, Petroleum Products Pricing Regulatory Agency, PPPRA, must be set up.

“Second, the committee must meet on a quarterly basis and reports of its meetings made public, while copies are sent to the Nigerian Financial Intelligence Unit, NFIU. Again, the number of fuel importers must be limited to about 11, or 15 maximum, while the committee should be shielded from the corrupting influence of politicians,” he said.

On his part, Igwe Achese, national president, Nigeria Union of Petroleum and Natural Gas Workers, NUPENG, advised the federal government and NNPC to tell Nigerians how they plunged the country into another round of fuel scarcity. He said since the labour unions in the oil sector were not connected with the situation, there was no justification for the fuel crisis across the country.

He suggested that instead of the government contemplating on whether to increase the fuel price or officially return fuel subsidy, it should revamp the nation’s four refineries with a view to reducing the pressure on foreign exchange for importation of petroleum products from abroad.

Like Achese stated, fixing the refineries would be one sure way of resolving the impasse. Even Kachikwu attested that the major solution to the fuel scarcity challenges in the country was for Nigeria to fix its refineries. During the Senate Public Hearing, he said Nigeria could not run away from the fact that working refineries would go a long way to resolving fuel crisis and prevent further occurrence of the hardship the people faced during Christmas and New Year celebrations.

Besides, the federal government is also targeting the Dangote Refinery as alternative to end the fuel shortage and refining crisis in the country. The refinery which will be delivered early 2019 would definitely relieve the country of the burden of fuel importation.

But as the government works on its plans of fixing the refineries, the Niger Delta Avengers has warned the federal government to brace up for another round of attacks that it would soon unleash on oil and gas facilities in the country. The militant group also stated that with the recent killings across the country, the time was ripe for the restructuring of the country, adding that anybody who is against restructuring is an enemy of Nigeria and particularly an enemy of the Niger Delta Avengers.

In a statement posted on Wednesday, January 17, on its website, the group, which wreaked havoc on oil facilities in 2016 and helped to precipitate Nigeria’s plunge into a recession, stated that it had concluded arrangements to carry out deadly attacks in a few days’ time.

The group said it would be targeting the deep sea operations of the international oil companies, IOCs, and others littered across the deep waters of the Niger Delta region. “While promising a brutal outpouring of our wrath, which shall shake the coffers of the failed Nigerian nation, our demand unambiguously is for the government to restructure the country. On the 3rd of November 2017 we promised to reactivate ‘operation red economy’ but as usual some overzealous and over-patriotic elders intervened and appealed as they have done twice before for us to avail them some more time to attend to the demands of the Niger Delta as championed by the Niger Delta Avengers,” the group said.

That, indeed, is another trouble sign that the Buhari government would do better to avoid. But whether the government would have the political will not to add to the already hard economic reality is left to be seen. Nigerians are surely waiting with their voter’s cards to tell the government their minds.

–   Jan.  19 2018 @ 21:10 GMT

Tags: 2019: How Lingering Fuel Crisis will Effect Buhari's Fortune All Progressives Congress APC Nigerian National Petroleum Corporation NNPC President Muhammadu Buhari President Yemi Osinbajo Realnews