UNDERSTANDING THE RESURGENCE OF FUEL CRISIS IN NIGERIA
UNDERSTANDING THE RESURGENCE OF FUEL CRISIS IN NIGERIA
By:
Nurudeen Dauda
December 25, 2017
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Beyond just blaming the oil marketers, in my view, our economic model is the issue. As long as we continue to "fixed" pump price, we could only have a "temporary" solution to fuel scarcity. In my understanding, the only "permanent solution " to the"perennial" fuel scarcity in the country is through local refining with total deregulation of the petroleum downstream sector. We are importers of refined petroleum products presently.
The recent crisis arose as a result of the continuous increase in the price of crude oil at the international market. "A subtle move by marketers for the federal government to increase fuel price appears to have failed. President Muhammadu Buhari is not disposed to the proposal,...He is also saying No to the re- introduction of fuel subsidy" (The Nation, Newspapers, December 24, 2017).
Before "subsidy" removal in 2016 the price of crude oil at the international market was around $30 a barrel. The landing cost of the products at that time was said to be below N130 a litre. The government put a price ceiling of N145 a litre. With the present price of crude oil at $65 a barrel in international market the marketers argue that the landing cost is between N165 to N170 per litre.
The oil marketers require that the government allows the market forces to determine the price. The marketers are unwilling to import the products because of the price cap of N145 a litre. We import refined products as a country. The moment prices of crude increase at the international market, it will definitely effect the cost of refined products being brought into our country. Landing cost are made up of: (1) cost of crude oil , (2) refining cost, (3) transportation cost,(4) Depot service cost,(5) Distribution/Marketing cost, (6) Taxes etc.
The oil marketers have asked for resumption of "subsidy payment" or total deregulation which the government rejects either one. They have stopped importation. NNPC has been importing 99.9% of products. The importation chain has its own stress because for the storage of the products, NNPC can only accommodate 55% of the products. The oil majors cater for 30% and independent marketers take charge of about 15%. So, at any point, these marketers are still needed.
The country is in "dilemma "presently and to solve the crisis, in my understanding, is to either resume payment of "subsidy"again or to totally deregulate the downstream sector which by implication means pump price increment.
In my opinion, the country could have permanent solution to fuel scarcity through local refining. We need either private refineries or "concessioning"of government own refineries . It is my personal belief that, even if we"resuscitate "the government own refineries it will hardly be "sustainable"due to our self- centeredness as well as unpatriotic nature. However, we could only have the "proliferations"of private refineries if we have total deregulation of the downstream sector not the present partial one. No private refinery will accept fixed pump price.
In my humble observation, majority of us are self- centered as well as unpatriotic. We have dearth of selfless as well as patriotic citizens . For this reason, we could hardly manage government own businesses successfully. The government is not good at doing business anywhere in the world much less in Nigeria for some obvious reasons unless, of course, we want to keep on deceiving ourselves.
It appears that the only way the government could main the present price is by paying subsidy which has been described as bad economics.
May God bless Nigeria!