The worrisome fuel scarcity being experienced across the country may have negative implications on the inflation rate of Nigeria’s struggling economy, reports EDDY OCHIGBO
Penultimate week, motorists across many parts of the country began their day in anxiety and confusion, when long queues suddenly surfaced at filling stations. The nation had hitherto experienced – to a large extent – smooth supply of premium motor spirit (PMS), otherwise known as petrol, in the last six years. Initially, Nigerians thought the looming scarcity would fizzle out in less than no time. Strangely enough, the Nigerian National Petroleum Company (NNPC) and its partners charged with the responsibility of importing and distributing the product, remained mum, giving no reason for the sudden scarcity of the product. However, before long news broke on social media that ‘Off-Spec’ fuel was in circulation and the fuel has wreaked havoc on some motorists in the country.
The ‘Off-Spec’ fuel imported into the country, as later explained by NNPC, under the Direct Sale, Direct Purchase (DSDP) arrangement, had a high content of methanol and ethanol contrary to Nigeria’s specifications standard, making it not only harmful to the public but also to vehicles.
Unfortunately, the importation of what has come to be known in some quarters as “dirty fuel”, came at a time when there was an outcry about the plan of by the government to remove subsidy on petrol consumption and its eventual suspension due to pressure by the Nigerian Labour and some prominent Nigerians. Little wonder then that the nation was plunged into unexpected fuel scarcity. Another interesting thing was how officials of the NNPC Limited and its partners who were alleged to be the companies that imported the off-spec fuel, namely Emadeb Energy Services, Hyde Energy Limited, A.Y Maikifi Oil and Gas Company Limited and Brittania-U Nigeria Limited, were busy passing the buck, back and forth.
Be that as it may, experts have revealed the multiple negative effects the scarcity of the product is causing the nation’s fragile economy and expressed fears that if nothing is done urgently to arrest it, the country’s Gross Domestic Product (GDP), would further drop to hopelessly low level.
While there is inadequate data to quantify how much the nation has lost daily to fuel scarcity as a result of man-hours being lost, its adverse effects on small businesses, high cost of transportation of goods and services – an already struggling economy is indeed worse off. The consequences of the shocks rising inflation characterized by the scarcity of the product are better imagined than experienced.
According to a 2020 World bank report, Nigeria’s informal sector contributes 38.83% to 57.55% of GDP, in an economy estimated at $432. 30bn – about 0.38% of the global economy – the lingering energy crisis being experienced today in the country is certainly not good for the economy. This is against the backdrop that Nigeria has an embarrassing 38% unemployment and 22% underemployment rate.
More worrisome is the fact that the digital economy that the present-day government is driving can never be realized or optimized with the looming energy crisis orchestrated by the current unavailability of fuel in the country. Worse still, is the large pool of unemployed youths which stands at 42.5% and 21.06% underemployment, according to the latest National Bureau of Statistics (NBS) figures.
Only last week, Statistician-General of the Federation, Simon Harry, disclosed that the present fuel crises being experienced across the nation may have an adverse effect on the inflation rate. He made this known while announcing the January 2022 Consumer Price Index (CPI). He said the fuel crisis would create an artificial shock in the economy and that the shock was capable of shaking the economy.
“Whether we like it or not, transporters will be taking advantage of the situation, thereby, increasing the costs of transportation. As you are bringing your commodities to the market for sale, you will be thinking of adding some amount on the selling costs so that you will be able to recover the costs of transportation.
“So that gives us a negative signal that is capable of affecting not just inflation rate, but also other macro-economic variables such as the Gross Domestic Product (GDP) and even the unemployment rate. I can, however, assure you that certainly, it is not the best for the economy and if we must maintain a stable macro economic environment, this kind of crisis certainly is not the best for it is not needed”, he stated.
He added that because the economy was strongly being driven by the private sector, the shock may affect a good number of private businesses as they may not be able to run effectively as expected. He, however, said that the February inflation rate could not be predicted based on the present fuel crisis as the numbers were still being collated.
On the present rate, the statistician-general said that CPI for January was 15.60 per cent from 15.63 per cent recorded in December 2021. However, on year-on-year basis, it was 0.87 per cent points lower than the rate recorded in January 2021 (16.47) per cent. Harry said that the headline index increased by 1.47 per cent in January, 0.34 per cent points lower than 1.82 per cent recorded in December 2021.
According to him, core inflation for January was 13.87 per cent, the same as that of December 2021, while food inflation for January was 17.13 per cent compared to 17.37 per cent in December. He also said that urban inflation rate stood at 16.17 per cent year-on-year in January, the same as that of December 2021.
“On the other hand, rural inflation was 15.06 per cent and 15.11 per cent in and December 2021 respectively. On state by state comparison, all items inflation on a year-on-year basis was highest in Abuja with 18.59 per cent followed by Kogi with 18.28 per cent and Bauchi 17.61 per cent. On the other hand, Kwara recorded the lowest with 12.94 per cent followed by Niger with 14.10 per cent and Oyo, 14.19 per cent”, he maintained.
Harry added that composite food index rose by 17.13 per cent in January 2022, compared to 20.57 per cent in January, 2021. The rise in the food index was caused by increases in prices of bread and cereals, food products such as potatoes, yam and other tubers, soft drinks, oils and fats, and fruits.
“On a month-on-month basis, the food sub-index increased by 1.62 per cent in January,, which was down by 0.57 per cent points from 2.19 per cent recorded in December 2021. The All items less farm produce’’ or Core inflation, which excludes the prices of volatile agricultural produce stood at 13.87 per cent in January 2022. This was higher by 2.02 per cent, when compared to 11.85 per cent, the rate recorded in January 2021.’’
He said that the highest increases were recorded in prices of electricity, liquid fuel, wine, tobacco, spirit, solid fuels, cleaning, repair and hire of clothing. Others are shoes and other footwear, other services in respect of personal transport equipment, other services not elsewhere classified and pharmaceutical products.
For food inflation, on the state by state basis, Harry said on a year-on-year basis it was highest in Kogi with 22.61 per cent followed by Enugu with 19.84 per cent and Akwa-Ibom with 19.67 per cent. Meanwhile, Sokoto had 14.18 per cent, Bauchi 14.63 per cent and Kaduna 15.01 per cent as the lowest in January.
Meanwhile, the House of Representatives Committee on Petroleum (Downstream), has since intervened and grilled the officials of a consortium of oil firms, led by Emadeb Energy Services Limited, accused of importing substandard fuel into the country. Members of the Abdullahi Mahmud-led committee had demanded explanations on whether or not the fuel supplied was in line with laid down rules.
Adebowale Olujimi, who appeared on behalf of Emadeb/Hyde and AY Maikifi, absolved his firm of blame, maintaining that the fuel, alleged to be methanol-blended, was solely delivered by Brittania-U via MT Torm Hilde in January 2022.
But the Chief Executive Officer (CEO) of Brittania-U, Uju Ifejika, disclosed that none of her firm’s cargoes contained bad fuel from the port of loading in Antwerp Belgium. While revealing that she was in possession of certificates issued to her firm by government’s quality inspectors, she retorted: “We have all our documents. Was methanol part of the specifications? No! Can you change the goalpost in the middle of the match? No! What we are saying is you cannot jail or throw us into the sea without hearing from us. We have our own test results. He who alleges must prove.”
Similarly, the Chief Operating Officer(COO) of MRS, Amina Maina, also absolved her firm of blame, insisting that fuel imported into the country was in line with NNPC specifications. The lawmakers promised to study the presentations by the firms and respond accordingly.
As the NNPC Limited and the federal government continue to contend with how to halt the excruciating fuel scarcity, industry watchers are optimistic that with the recent increase in importation of more products to augment the supply chain, the scarcity may soon become a thing of the past.