For upward of six decades, Nigeria has remained the leader of other African nations in terms of crude oil production and export volumes. However, for about half of this period, the continent’s largest economy has also largely depended on the import of refined petroleum products to sustain businesses and livelihoods, with this import regime proving to be volatile, unsustainable, and with commodity scarcity and economic crisis being its perennial common denominator. In this feature, Yange Ikyaa, Patience Chat and Rhema Oguejiofor made a critical review of joint measures that were recently taken by industry players, including state and non-state actors, to find lasting solutions to this age-long national challenge.
In the last week of January, the leadership of the Nigerian National Petroleum Company (NNPC) Limited had an emergency engagement with the nation’s petroleum industry operators and topmost security stakeholders to deliberate on fuel distribution challenges that the nation was facing at the time and may still be facing at the moment.
Those present at the meeting included the Chief of Defense Staff, General Lucky Irabor (CFR); the Inspector General of Police (IGP), Usman Alkali Baba; a representative of the Chairman of EFCC; The Controller General of Nigeria Customs Service; the Group Chief Executive Officer (GCEO) of NNPC Limited, Mallam Mele Kyari; the Authority Chief Executive of Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Engnr. Farouk Ahmed; as well as management staff of NNPC Limited and downstream stakeholders from the organized private sector.
In his opening remarks, Kyari declared that “we do have a challenge, no doubt, of monumental proportion, and the solution to the challenge is in this room.”
Then, he went on to say that “there are crises around fuel distribution and this has resulted in a number of issues, and which has taken a very different dimension that is clearly unanticipated, and I am not also sure that it is planned.”
Yet, the NNPC boss said there was no product scarcity in depots or at points of arrival at seaports around the country, insisting that “it is good to be aware that we are not dealing with a supply problem. All our suppliers are either in this room or represented in this room.
“As we speak now, we have 831 million liters in marine that is in shuttle vessels and mother vessels and in the various depots that all of us here represent, including NNPC. We have up to 738 million liters of fuel in depots that are documented on the platform of the regulator of the industry.”
Kyari’s arguments, as captured above, were based on the fact that, in Nigeria, industry sales data is collated every morning and validated every evening for all fuel types, including AGO and PMS sales data in all of the depots nationwide. This means that, for AGO, there is a 24-day sufficiency of AGO data in all of the depots. By implication, there is no AGO problem for fuel delivery logistics.
Then, for the other refined fuels, there is sufficient supply in-country by the private sector and some of it by NNPC. And for every data displayed, the vessels, be it mother vessels or shuttle vessels, their locations are known, so it is not data in dispute.
As Kyari said, “for every depot, except everyone is lying, fiscalization is done in the morning and in the evening. These figures are coming from fiscalized volumes in all the depots, so there are products in different depots.”
This means that during evacuation from depots, all depot owners submit data on volumes of every truck that leaves the depot. Similarly, data is also provided on the drivers, on truck’s registration numbers, owners, and destination, and bridging depots.
From this data, NNPC Limited has established that since January 2022, whenever PMS evacuation volume from depots goes below 60 million liters per day continuously for three days, a fuel crisis happens in the country.
Although some people may argue that there is no knowledge of valid consumption figures in Nigeria, there certainly is some reliable data on evacuation. For instance, in early 2022 when there was contaminated fuel imported into Nigeria, daily evacuation volume from depots came down to 56 million litres, leading to a crisis.
Then, when there was a challenge to add volume to the market in October 2022 during the flood, trucks could not move fuel from the southern part of Nigeria to the north, and there was a crisis too.
So, according to Kyari, there is no shortage of fuel going into the market in Nigeria, except it might be ending up at the wrong destination.
His words: “Nigerian fuel is being smuggled to other countries, it is not a secret to possibly everyone present in the conference room or people connected to them. The fuel is smuggled even in marine containers and there are evidences that some customers are taking fuel outside the country.
“This is the reality we are dealing with and government and security agencies are working to get to the root of the problem. There is cross-border smuggling that is causing some of the problems we are facing. Though enormous efforts are being made, this is a persisting challenge.”
The daily evacuation volumes officially quoted in Nigeria seemingly include the ones being smuggled out to neighbouring countries, meaning that anytime the neighbouring markets are not satisfied, the Nigerian domestic market is affected.
This sad reality necessitated Kyari to make this patriotic call, saying “the solution to this problem is in this room. We are seeing the level of chaos our business is causing to this country. What pain it is causing to the ordinary people of this country.
“And no matter what excuse we give, including NNPC, that we are not responsible for this problem, we are all attached to it.”
At the height of the Nigerian fuel crisis in January, some filling stations sold PMS at N350 per litre, with the price reaching as high as N800 per litre in Benin City.
Valuechain learnt that, due to market dynamics and commercial realities resulting from handling charges, industry regulators approved price caps but the market did not respect such price limits. Instead, higher depot prices were adopted by some marketers and held onto.
As a result of this, there were claims in some quarters that since some marketers keep these higher prices, those involved cannot take products to their own stations, implying that they have been undersupplying their own stations.
That means there is no way an independent marketer will buy from a major marketer and not sell at the prices that are creating a crisis across the country. In other words, no one will take products at such higher prices and sell at a price equivalent to the one of NNPC. It is simply not practical.
Kyari lamented that “in the market, you are expected to do the needful, which is supply to stations, but no one has kept to this. And the end result is that there will be queues in our stations and those of MOMAN.”
However, he said, “there are exceptions; there are companies that have kept to this, they are not doing what others are doing and I congratulate them and they will be celebrated at the right moment. They are present here at the event but others are abusing it.
“People can deny that they are not selling at higher prices but this is not a denial time. The reality is that people are doing it.”
It has been alleged that two sets of records are kept by some marketers, one for government regulators and another for their own businesses, and this habit may be possibly widespread, resulting in the fuel distribution crisis that is often witnessed across Nigeria.
But Kyari concluded that “respectfully, every accumulation we do, this is profound and this is personal probably; no one has ever gathered wealth and gone to the grave with it, and no one can cause pain to ordinary people and expect to enjoy this money. We can deny it, but that’s what is happening.
“I am warning every one of us here, some vessels left Lagos and they switched off their AIS. We have already reported them to the Authority and we have called the owners of those vessels.
“Technology has come to play and anyone who diverts vessels, we will see it now and we will take the necessary actions. The Chief of Naval Staff is here, we will not just tell them to arrest it, we will ask them to do what we did to the crude oil vessel, no matter who owns it, so that you won’t do it again. For all of us here, this is a solution time.”
In his own remarks, the NMDPRA Chief Executive Officer, Engr. Farouk Ahmed, said “we are here to solve a problem, a major national issue that is involving Nigeria’s security apparatus to address. We don’t want to go that far, we want to solve this within ourselves.
General Lucky Irabor, the Chief of Defence Staff, maintained that, “within the matrix of trade mapping, the challenge of unavailability of fuel across the country has risen to a proportion that it has become a concern for the defense and security of our country. And looking at the processes that have been placed to tackle this, I will like to let you know that we believe the solution lies in this room.
“More importantly, everyone must know that the government is not handicapped. I need to also indicate that there are alternatives and there is nobody that is indispensable and I have the mandate of Mr President to come and say that.
“This is an internal crisis, but if it crosses the threshold and affects our defense and security, the government is not handicapped; there is an alternative. I believe that within the remit of the framework that will be discussed, the solutions will be established.
“I trust that solutions will come and if there is no solution, let me reiterate that government is not handicapped and there is an alternative. We pray that we do not get to the level that the alternative will be activated.”
On his part, the Inspector General of Police, Usman Alkali Baba stated that “what is being looked at is a problem of distribution and if the distribution process has loopholes and is being exploited by those who want to exploit it, there is an alternative to increase the level of monitoring and supervision.
“It is the role of security agencies to assist the NNPC in monitoring the processes of fuel distribution if that will give a headway and solution to the problem.”