Running on empty
Petrol scarcity has resurfaced across Lagos State as marketers claim that the depots now have limited supply. Petrol marketers told…
Petrol scarcity has resurfaced across Lagos State as marketers claim that the depots now have limited supply. Petrol marketers told BusinessDay the Nigerian National Petroleum Company Limited, which has returned as the sole importer, was rationing supply. Also, Reuters reported that the NNPC owes around $3 billion to fuel traders for imported petrol. Reuters said that the tumbling naira and rising global fuel prices have increased the effective subsidy the NNPC is paying. Other sources said the NNPC was taking more than 130 days to make the payments instead of within 90 days.
While the Tinubu administration says that subsidies are officially over, it is clear that the only way that the price of petrol has remained at its current level is due to some sort of subsidy arrangement. This shady grey of the subsidy regime gives rise to the current situation, and as with all other grey areas, it provides an incentive for abuse. Last year, following President Tinubu’s declaration on his inauguration day that the petrol subsidy was no more, the NNPC drastically increased the pump price of the product at its stations and independent marketers followed suit. Subsequently, the independent marketers suspended the importation of the product due to cost and exchange rate uncertainty. A week ago, an NNPC official attributed the insufficient supply of petroleum products at certain filling stations in Lagos to a problem at one of its depots in the state. However, it has become evident that the issues are more complex, including delays by the NNPC in making subsidy payments to independent marketers. It is clear that the NNPC cannot fully supply the market as the sole importer at current prices. It is also concerning that the NNPC has not been able to honour its obligations, especially when juxtaposed with the recent naira rebound. This development further reinforces that the President’s pronouncement that “the subsidy is gone” was just lip service. A situation where the NNPC is the sole importer of petrol and other independent oil marketers cannot access forex to import refined crude oil products means that the transaction is not yet transparent. We wonder what would happen to the exchange rate if these independent oil marketers tried to get FX for petrol imports. President Tinubu needs to come clean on subsidies, so they can be paid openly, or insist on no subsidies and let the market determine the fuel prices. Clarification, not lukewarmness, is what is needed now.