Fuel scarcity: Market players blame government

*MOMAN pledges enhanced distribution for yuletide

Sopuruchi Onwuka

Key stakeholders in the Nigerian petroleum market have blamed the prevailing fuel supply instability in the country on regulatory failure, infrastructure obsolescence, acute foreign exchange crunch and lack of resource accountability by monopoly player in the system.

Speeches, remarks and presentations delivered by players and investors in the Nigeria downstream petroleum sector at last quarter virtual webinar hosted by the Major Oil Marketers Association of Nigeria (MOMAN) pointed at backstage transactions that currently rule market supply.

Besides, then players decried low investment flow into logistics, facility and infrastructure development in the market; encouragement of state monopoly in the system; unavailability of foreign exchange to private players; and rising and unverifiable subsidy bill on the country.

The leaders of the different marketing and investor groups agreed that the regulars in the system have been captured to promote opaque transactions and entrench state monopoly that runs multiple import deals that lack transparency and accountability.

According to the industry leaders, despite the massive import figures posted by the Nigeria National Petroleum Company Limited and whopping N3.0 trillion in annual fuel subsidy, Nigerians still suffer crippling fuel shortages and associated losses in gross economic productivity.

A statement by MOMAN holds that despite decades of subsidy programmes and massive financial investments in the programme, “Nigerian institutions now have a diminished capacity to deal with the current local energy crisis,” saying that “a disruption in any part of the supply chain causes ripple effects and results in queues at stations.”

In dismissing the prevailing fuel subsidy as economic liability, MOMAN said the country “must begin the process of price deregulation to reduce this inefficient subsidy. If the country wishes to implement a subsidy, it must be in areas targeted to help those it should help such as in agriculture and transportation to reduce food price inflation and generate more jobs for Nigerians.”

The group also restated its call for immediate liberalization of the market and enthronement of effective regulatory institutions to encourage transparency in the supply process, subsidy accountability and service efficiencies that are driven by fair competition.

“We must find a way to liberalize supply. We must bring transparency and competition into supply to ensure steadier, more efficient supply at optimum prices. Imported products must compete with locally refined products to find a meeting point between the need for local refining and competitively low but cost recovered prices for Nigerians for sustainability.”

The marketers who account for over 60 percent of retail outlets in the country made it clear in the statement that all stakeholders in the Nigerian economy must participate and collaborate in rescuing the fuel market from systemic inefficiency.

“The dialogue with the Nigerian people needs to begin to identify, negotiate and agree these areas and begin implementation to save the downstream industry which has been in degradation freefall due to a lack of investment to maintain, renew and grow assets and facilities such as refineries, pipelines, depots, trucks, and modern filling stations.

“These lack of investments contribute in no small measure to fuel distribution inefficiencies and high costs. Neither the new refineries nor the refurbished refineries will survive with the refining margins at current pump prices.”

MOMAN stated that exploration, production, refining of crude oil and the distribution of refined products are international businesses “with ebbs and flows and has specific models, guidelines, rules, and norms designed to protect and sustain consumers of this type of energy and populations impacted by its supply chain.”

The group maintains that “to cut corners would be irresponsible, unaccountable, and unsustainable.”

The group noted the concerns of travelers in the prevailing yuletide period and pledged deploy its full strength in collaboration with other players in the mart to fuel transportation within the perio.

“We envisage a rise in demand during the yuletide season and are prepared to work round the clock to keep our stations running,” the group declared.

To permanently address the prevailing scarcity and associated high cost of products at retail pumps, MOMAN reiterated the need for urgent but gradual deregulation of the market in order to avoid prie shock in the economy.

“As always, MOMAN demands a full deregulation of the petroleum downstream sector in phases to cushion the effects of the impact of a sharp rise in PMS prices on the long-suffering, hardworking citizens of Nigeria.”

In his remarks, the President of National Association of Road Transport Owners (NARTO), Yusuf Othman, capacity decline and operations inefficiency arising from low investment and insecurity would further constrain distribution of products.

He made it clear that failure of government to efficiently run the nation’s robust internal distribution infrastructure would continue to make the economy vulnerable to fuel supply shocks. He explained that sheer size of the Nigeria fuel market is too large to be serviced by trucking.

He also pointed at weak regulation as the primary reason for lack of competition and operating inefficiency in the market.

Othman wondered why regulators would permit trucking of fuel and other imported products from Lagos quays to the nation’s eastern coastal states like Bayelsa, Port Harcourt, Akwa Ibom and Cross River where berthing ports could easily exist.

 He called on regulators of help protect the economy from the visible inefficiencies of monopoly, warning that trucking fleets available for fuel distribution in the country are fast depleting while most fleet operators are no longer efficient due to high cost of diesel and rising insecurity on the roads.

He also noted that banks and non institutional lenders are no longer financing tanker fleet acquisition due to waning return as price of diesel escalcates.

“Transporting fuel is now risky, costly and increasingly inefficient,” he noted.

On the industry, Othman observed that every segment of the industry from trucks, refineries, pipelines, depots and jetties is suffering capacity loss due to low investment in facilities and infrastructure.

Other industry groups that participated in the webinar include retail station operators, organized labour media representatives and international market intelligence analysts.