You would probably be forgiven for thinking Dr. Ibe Kachikwu, Nigeria’s Minister of State for Petroleum Resources, is confused. He may not be, but his words and actions certainly suggest he is. In one breath last week while trying to defend government actions on the issue of fuel pricing and availability, he stated that the PPPRA template will be reviewed but that the price will remain N145/litre.
“As part of this committee’s work, we are also reviewing that template to see whether there are things we need to do to help us ensure that we can accommodate sale at the N145/litre window. So that is also going to be looked into. The PPPRA is working on that and is heading a special committee on it,” he is quoted as saying.
Pray, how can you review the pricing template and yet retain the N145/litre cap? A day earlier at the Senate hearing on the fuel crisis, Kachikwu had said the landing price of petrol made it impossible for marketers to sell at the N145 government rate, with current landing cost per litre being in the range of about N171/litre. He hinted that various options were on the table, including one of a “plural” pricing regime with NNPC stations selling at N145/litre and independents selling at a commercial rate. The next day he denied that a price increase was on the cards.
While speaking before a meeting of the joint committee of the Senate and House of Representatives convened to find a lasting solution to the fuel crisis, Kachikwu also hinted that a possible solution would be to work with the CBN to establish an exchange rate mechanism that will enable marketers source foreign exchange at N245 to the dollar. “If we do that, then marketers can import without price differentials and sell at the government price cap of N145”, he said.
Again, Kachikwu inexplicably places more emphasis on retaining the price cap rather than finding a lasting solution to the arrangement which has proven ineffective in the effort to guarantee the security of PMS supply. This disposition invariably lends credence to the unfolding narrative that Nigerians can forget about a review of fuel price until after the 2019 elections for obvious reasons.
Kachikwu has found himself between a rock and a hard place. A technocrat with a perfect understanding of commercial impulses and market realities, he knows that sustainable availability of petroleum products in Nigeria will remain a mirage with price caps. The market has unanimously called to high heavens for market deregulation. At the last OTL Africa Downstream in October 2017, operators in one voice urged government to remove price caps if the market is to thrive. Yet Kachikwu is beholden to the populist leaning of President Buhari, who is confronted by the reality of an early commencement to the 2019 Presidential campaigns. In Nigeria, the lines between politics and trade could often be blurred.
Some key stakeholders have not helped in clarifying the situation either. In a Channels television interview on Friday 5 January 2018, Dapo Abiodun, Chairman of the Depot and Petroleum Products Marketers Association (DAPPMA), who is also a member of the ruling All Progressives Congress stoked further confusion when he stated that a price increase at this time would be unfair on the population. This position has helped postpone the day of reckoning in Nigeria’s downstream sector, as the politicization of PMS pricing continues to impoverish and heap untold hardship on the average Nigerian.
Yet in March 2017, Abiodun told M&P in an interview that “If we were to sell as we buy, we would be selling at N172/litre… If we are going to leave the price at N145/litre something has to give. As of today, marketers cannot import one drop of PMS because they cannot sell it. Ideally, the ceiling has to be let go so that we can buy and sell at cost plus margin.” He continued saying “The current arrangement is not sustainable because of the accruing subsidy; but I believe that we cannot avoid a subsidy either by way of foreign exchange or by way of parting with crude. There is going to be subsidy somewhere until we let the ceiling go on the prices.” It is not clear whether Abiodun’s position is shared by many other members of DAPPMA.
Through all of this, the substantive Minister of Petroleum, Muhammadu Buhari has maintained a deafening silence on issues concerning his ministry. It is arguable that the fuel scarcity has persisted among other things, due to the fact that little success has been recorded with rehabilitation of the nation’s refineries, which have failed to operate at optimum capacity. From the outset of this administration, Kachikwu, then Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), never hid his belief that the refineries should be sold, as they were working at below 30 per cent capacity. But Buhari overruled him. Two-and-half years after, none of the refineries operates at 60 per cent capacity; and all, combined together, only produce five per cent of the country’s daily petrol need of 30 million litres/day.
As it is, Kachikwu cannot be seen to cry more than the bereaved. But the reality is not comforting. NNPC has been subsidising petrol imports while independent operators can no longer import. Stakeholders are trading blames, while marketers are giving conditions to be able to import and sell at N145 among which includes making forex available at a reasonable rate; and issuing an Executive Order to government agencies such as the Nigeria Ports Authority (NPA) to receive importers fees and charges in the local currency, as espoused by the DAPPMA Chairman at the investigative hearing on the by the Senate Committee on Petroleum downstream.
Whether the queues will return is not a question of “if”, but “when”. And it may probably be worse than experienced during the hellish Christmas holidays of 2017.