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Can Nigeria's Fuel Crisis Ever End?
-What is Buhari Doing?
From the air, as your plane approaches Murtala Muhammed International Airport, Lagos, the first thing you will notice is the long and snaky line of cars stretching some miles back from fuel stations and into numerous side streets. Like a giant python, you will see the head of the snaky line choking off the fuel station, with haphazard and disorderly packed cars. Crowd of pedestrian mill around the fuel outlet with numerous cans littering the premises. And then, you get hit with the sudden realization that the usually busy streets are devoid of moving vehicular traffic. The country is once again caught in the throes of a painful fuel scarcity.
On a lighter mood, a picture of an expatriate Caucasian precariously perched on okada (motor bike), sandwiched between the driver and mobile police guard, makes the round on social media. While cartoonists and comedians have found ample material from the situation to feed the imagination, it remains a perennial problem for Nigeria. Despite promises by government after government one of the world's leading exporters of oil cannot find enough for its people.
Prices of commodities and services have shot up as a result and some businesses, cultural and educational institutions have been intermittently shut due to the biting effects. Nigerians who rely on fuel to power their electricity generators to run their businesses and homes, due to the nation's erratic power supply, have been gnashing their teeth in anger.
However, one thing is definite, the nation's oil wells have not dried up; corrupt politicians are obviously still feeding fat on it; and the crude is still being stolen daily by the hundreds of barrels each day according to Reuters report.
So, what is the present cause of this round of fuel scarcity that has grounded businesses and government services nationwide?
Years of public sector mismanagement and endemic corruption have debilitated and broken every facet of the nation's economic and social institutions. Nigeria liquidated public corporations such as the Nigeria Airways and Nigeria National Shipping Line; the electricity corporation, NEPA, went comatose and was unbundled into smaller regional private companies, DISCO's , with no solution yet in sight; the telephone company, NITEL, is still on life support, paving way for private mobile cell phone providers to take over the communications industry in Nigeria; public water utility agencies exist only on paper and have ceased to process and supply water, as private boreholes have become the primary source of clean water supply in Nigeria. Due to the failure of the police and judiciary to effectively perform their statutory functions of dispensing justice and providing protection for communities, there are now legions of private armies, gangs and cults filling the void created.
The present fuel scarcity has its roots in decades of mismanagement of the nation's crude oil extraction and refineries which are never fully functional, incessant disruption of oil supply pipelines, abuse of the current refined oil importation contracts, and the huge corruption and scam inherent in the oil subsidy payment. The petroleum agency, NNPC, is not an exception to the decay of Nigeria's national institutions but the difference this time around is that Nigerians voted for change in 2015.
Dr. Ibe Kachikwu, the Minister of State for Petroleum and Group Managing Director (GMD) of NNPC believes he knows the cause of this round of fuel scarcity and has the solution but he makes clear that he is no magician and that it will take up to May 2016 to effectively resolve the problem, eliciting more outrage from the public for his candor. Dr. Kachikwu, obviously is also not a politician, otherwise he would have been more discreet in his choice of words. After better reflection, he tried to work back his original time frame for a resolution and committed a more egregious offence of lying about how quickly the problem will be resolved.
According to Dr. Kachikwu, the cause of this fuel scarcity is the over one-year delay of payment for fuel subsidy, which carried over from the immediate past regime. The delayed subsidy payment subsequently ballooned to billions of naira. By the time Kachikwu was appointed into office and was able to verify some of the debts to weed out scam and pay the majors, the scarcity of foreign exchange which has exacerbated made it almost impossible for the majors to place import orders for new shipment of refined fuel, leading to a break and dangerous lapse in the supply chain. When new shipment of imported fuel resumed, there was already serious shortage. The additional time it takes to load and transport the landed refined fuel to the hinterland because the oil pipelines are not functional compounded the scarcity.
Dr. Kachikwu claims that he is working to achieve a permanent fix to the causes of this fuel scarcity. As he puts it, the long term solution is to throw the oil supply and distribution to the private sector. For the foreign exchange problem, Kachikwu claims to have convinced the upstream companies to provide some foreign exchange buffer over the next one year for oil importers. Companies like Total, Mobil, Agip, ENI, Shell, were able to put out 200 million dollars of foreign exchange availability into the plan. He also secured some foreign exchange allocation from the CBN to augment the cost.
Further, for the first time in over ten years, Kachikwu claimed that he was able to work with some contractors to pump crude from Escravos into Warri, and were able to pump oil from Brass into Port Harcourt, and from Warri right to Kaduna refineries. He is planning to contract this work out as permanent features of the system.
He is also seeking joint ventures that will bring in funds, refurbish depots that had been abandoned for upwards of a decade, so that NNPC can have the distribution network needed to solve fuel scarcity problem. In his view, it is not enough to bring in cargoes of petroleum products because when they arrive in Lagos, about 3,000 trucks are required to ship them round the whole country, a system he considers inefficient. It takes an average offour to sevendays to do that, which is a logistical nightmare.
Unfortunately for Kachikwu, Nigerians believe strongly in magic and miracles. In a nation where overnight billionaires are no longer news and legion of preachers claim miracle cure of the sick and maim, an admission that one is not a magician is akin to admission of failure. Nigerians have suffered enough and want a quick fix. In real life, however, it may take less than a minute to destroy, rebuilding takes time. Some analysts willing to give Kachikwu and the new administration a chance argue that one year in office is not enough time for any meaningful assessment of their efforts in this direction.
Dr. Kachikwu posits that “it doesn't matter what we achieve in our transformation agenda, (fuel scarcity) is the single most difficult item, which if not solved can bring down the polity and can create mayhem here.” If Dr. Kachikwu, an experienced and seasoned oil industry captain, executive and manager, with the strong backing of the President, a former Federal Commissioner for Petroleum, under whose tenure Nigeria built her largest number of refineries, fails to fix the problems bedeviling the nation's oil industry, finding an alternative option will be tough.