Another ticking deregulation time-bomb

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The recent fuel scarcity across the nation and the attendant buck-passing have raised fresh questions about the efficacy of government’s PMS subsidy implementation strategy. The recent statement by the Minister of Petroleum, Mrs. Diezani Alison-Madueke that “the oil subsidy policy cannot be sustained any longer,” shows that there is likely to be a fresh plot by government to deregulate the downstream sector, writes Olisemeka Obeche.

Fuel scarcity nightmare

For over three weeks in March this year, millions of motorists, commuters as well as business operators, among others were caught in the web of fuel scarcity across the country. Narrating his experience to TheEconomy, Mr. Felix Ugboaja recalled that his misery could have been averted if he had been smart enough not to fall for government propaganda.

According to him, soon after the rumour of impending scarcity, his landlord persuaded him and a few other tenants to contribute money to buy enough fuel stock ahead of time. “But I dissuaded them from such panic-buying following government’s assurance that there was enough stock to take care of any possible shortfall in products supply,” he said.

However, Ugboaja  later realized that what started as a mere rumour became a reality and within days the scarcity had spread nationwide resulting in long queues at few petrol stations selling the “precious liquid” at prices above N150 per liter. “Ironically, when the fuel scarcity heightened in Lagos, many of us who did not foresee the scarcity, excluding my landlord who bought enough fuel, went through hell to get it even at N250 per liter,” he recalled.

Another resident of Lagos, Mr. Olawale Jimoh, said he spent seven hours at a petrol station, but ended up buying from a black-marketer nearby at N300 per liter. “Someone informed me that there was a particular filling station that was selling fuel at night and I decided to go by 4 am. Unfortunately, after spending close to eight hours on the queue, we were told that the fuel had finished, forcing me to patronize some boys selling in jerry cans nearby at a higher prices,” he said.

Investigations by TheEconomy show that the scramble for few available products at higher prices, and its ripple effects on the cost of goods and services, all exacerbated the prevailing economic hardships.

Although at the time of this report in late March, normalcy had returned after weeks of topsy-turvy; some analysts focused on the causes of the avoidable fuel crisis. The blame-game between government and marketers in the wake of the crisis had further fuelled speculations that the demon tormenting the sector is still in control.

 Conflicting claims/power-play

When Mr. Obafemi Thomas Olawore, the Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN) raised an alarm of a looming scarcity of fuel in the country in late January, the management of the Nigerian National Petroleum Corporation (NNPC) quickly dismissed it. “If we don’t get approval on time, it will affect our ability to import products and this will in turn delay distribution of products nationwide. The management of PPPRA should release allocations immediately to avoid products scarcity in the country,” Olawore had warned.

He disclosed that the Apapa depot in Lagos, which controlled about 43 per cent of national demand, had only five days fuel sufficiency in stock.

But the NNPC disagreed with Olawore’s view. In a statement signed by its General Manager, Public Affairs Division, Dr. Omar Ibrahim, NNPC advised consumers to ignore such alarm and refrain from panic-buying of fuel as it had enough stock of products in its reserve to take care of any emergency shortfall. “What the corporation has in stock is enough to make the country remain wet with petroleum products round the clock,” Ibrahim boasted.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) also debunked the speculation that the country will soon run out of fuel due to acute shortage of products from the delay in the first quarter fuel allocation by the Petroleum Products Pricing Regulating Agency (PPPRA), describing it as misleading. “There is no scarcity of fuel in the country. Marketers should stop giving wrong signals over scarcity of petroleum products. We are loading petroleum products adequately from all NNPC depots across the country and we don’t think there is any sign of scarcity because NNPC and PPMC have assured us of sufficient stock in the country,” declared IPMAN’s National President, Aminu Abdulkadri.

According to him, the fuel situation in the country is quite stable; and there is no cause for alarm, as smooth supply of products has been sustained for period of two years. “NNPC, PPMC and leadership of IPMAN have been on top of the situation. We should not encourage anybody that will portray the country in bad light by saying we are running out of fuel. What we have in the country currently is adequate. We have equally agreed with the Petroleum Equalisation Fund (PEF) to ensure payment of marketers’ bridging claims as at when due, which at the moment the agency is doing its best,” he added.

With conflicting statements emanating from the two sides, many were confused as to which side to believe and the one to ignore. Although, the warning seemed too critical to ignore, many found it difficult to disregard the assurance from the NNPC and the IPMAN which controls about 87 per cent retail outlets in the country and the large haulage of the sector.

The unending blame-game

Soon after the fuel scarcity hit the country the NNPC came up with another statement, attributing it to the disruptions in the pipeline network leading to its depots. NNPC’s Group Managing Director, Mr. Andrew Yakubu, argued that fuel scarcity occurs when the distribution network is breached. “The best way to distribute fuel is through the pipeline network to our various depots across the country. We have over 20 of them and about 5, 000 kilometres stretch of pipelines and that is the best and the most efficient way to distribute petroleum products, but when they are breached, then you have this kind of challenge,” Yakubu said. He however assured that “as soon as we fix the pipelines, normalcy will be restored.”

Curiously, NNPC’s claim that the scarcity was caused by breach in network was in contrast with the excuse given by the Department of Petroleum Resources (DPR). In fact, DPR’s Abuja Zonal Operations Controller, Aliyu Halidu, insists that the report linking the petrol scarcity to bunkering (pipeline breaches) was misleading.

Halidu had earlier told Senate Committee on Petroleum Resources during its budget defence that the fuel scarcity was caused by non-renewal of contracts of some independent marketers who imported the product as well as non-payment of subsidy fund to other marketers by the federal government.

And following unsuccessful efforts to restore normal fuel supply across the nation and the activities of unscrupulous marketers who capitalized on the crisis to cheat hapless consumers, the Minister of Petroleum, Mrs. Diezani Allison-Madueke was on inspection of some filling stations to enforce the release of hoarded products.

The minister however came up with the fuel diversion theory as the cause of the scarcity, blaming it on the marketers and their truck-drivers. “We have enough fuel to wet the country, but the challenge we are having is that, after loading, some truck drivers will not supply the lifted products at the designated filling stations. We learnt that some of the marketers instructed their drivers to change the number plates of their trucks to make it difficult for tracking,” the minister claimed.

But IPMAN which later made a volte-face from its earlier stance, however, blamed government for the crisis.  IPMAN boss, Aminu Abdulkadri, claimed that failure of the federal government to pay its members for products imported since the third quarter of 2013 forced them to stop further importation and rely on PMS imported by the NNPC. “We appeal to the Ministry of Finance to expedite action on payment of marketers’ claims to save the country from another round of scarcity. As we speak, only NNPC can import petrol, while other marketers who are supposed to import 50 per cent are cash-strapped. There are problems of payments. The way out is for the Ministry of Finance to act as quickly as possible to pay our members,’’ he said.

Deregulation time-bomb

President Goodluck Jonathan’s administration had consistently praised itself for regular fuel supply at official pump price, but the fuel scarcity that nearly crippled the economy for weeks in March had left much to be desired. Although the government’s belated measure gradually paved the way for restoration of normal supply in some parts of the country, most analysts contend that the crisis has not been resolved.

However, the Petroleum Minister on March 18 muted the idea of total deregulation of the downstream sector as the only possible way out of the fuel scarcity crisis. Mrs. Alison-Madueke, who a week earlier told the lawmakers that the Presidency had no plan to remove subsidy on petrol, sensationally declared that “the subsidy policy cannot be sustained any longer,” during a presentation at the  recent Nigerian Oil and Gas Conference in Abuja.

Alison-Maduekwe claimed that her reason for advocating the stoppage of the controversial fuel subsidy programme this time around was “because the subsidy payment did not benefit the poor it was targeting, but rather it is benefiting the rich”.

The minister’s volte-face came a few days after the Finance Commissioners from the 36 states of the federation rose from a Federation Accounts Allocation Committee (FAAC) meeting in Abuja, with a resolution asking the Presidency to end fuel subsidy in the country.  “We looked at subsidy on oil and see that it is more or less a solution worse than the problem you intend to solve. Besides, it is like a system that robs Peter to pay Paul. It makes the rich to get richer and the poor to get poorer,” declared Mr. Timothy Odaah, Ebonyi State Commissioner for Finance and Chairman of the Finance Commissioners Forum (FCF).

“What we are advocating is that the subsidy should be removed so that every state or any member of the federating unit sharing from FAAC will take its own money and then decide to use it or grant subsidy at a level that it will be able to afford,” he added.

This latest moves  by the government to remove fuel subsidy have confirmed the earlier suspicion in many quarters that the artificial scarcity was created as a ploy to push for the end of PSFE and  then increase the pump price of petrol. The Nigerian Labour Congress (NLC) and the All Progressives Congress (APC) had at the height of the fuel scarcity crisis accused the government of conspiring with oil marketers to increase petrol prices.

In separate statements, the NLC and the APC said the petrol scarcity being experienced around the country was part of a plot to make increasing the pump price of fuel a fait accompli.

NLC in a communiqué issued after a meeting of its central working committee in Abuja on March 12 raised alarm that there was a plot to increase petrol price which it vowed to resist.“The CWC condemned the present nationwide fuel shortage, describing it as a cruel conspiracy between the government and the marketers to impose hardship and trauma on the poor and hapless Nigerians with a view to ostensibly increasing fuel prices,” the union stated.

The statement further reads: “Any attempt to further engender hardship on the working people through increase in fuel prices will be resisted by the labour movement. Accordingly, the CWC calls on government to stop this subterfuge and take all necessary actions immediately to restore full and uninterrupted supply of petroleum products to consumers across the country.”

APC in a statement signed by its Publicity Secretary, Lai Mohammed accused the federal government of “acting out a clandestine script to increase fuel prices through the back door”, adding that the current petrol scarcity “may have been induced to make higher fuel prices a fait accompli for Nigerians.”

From all indications, another deregulation time-bomb is ticking. The puzzle remains:  Will the government be bold enough to deal with the powerful cabal, that is admittedly pocketing the subsidy proceeds or allow it to continue to wreak havoc in the system? Only time will tell.

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According to him, soon after the rumour of impending scarcity, his landlord persuaded him and a few other tenants to contribute money to buy enough fuel stock ahead of time. “But I dissuaded them from such panic-buying following government’s assurance that there was enough stock to take care of any possible shortfall in products supply,” he said.

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