Explained: Why Nigerians are experiencing recurring fuel scarcity

Lagos and other states in Nigeria are beginning to experience fuel scarcity as private depot owners hiked the ex-depot price of petrol from N630 to N720 per liter.

This occurred as fuel scarcity intensified in Abuja and nearby states on Sunday, with some filling stations selling PMS for as much as N900 per liter.

Punch reported that several filling stations in Lagos, Ogun, and some other states have run out of stock as they refused to purchase high-priced fuel from private depots.

Reasons for the Fuel Scarcity

In an interview, Hammed Fashola, the National Vice President of the Independent Petroleum Marketers Association of Nigeria, stated that many filling stations remained closed because they had no fuel in their tanks.

He said, “Those that shut their stations do not have fuel to sell. When you don’t have fuel, you cannot open your station. That is the problem. You know the NNPC is the sole importer of this product. I think it is in the best position to tell us what is actually going on.

“Currently, independent marketers cannot buy what the private depots are selling. They are selling fuel between N715 and N720 per liter. How much will marketers sell the product? Look at the cost of bringing it to their depots; with transportation and other depot expenses, it will be too costly for them. That is why the stations are shut down. Some marketers refuse to go and buy because they know the masses cannot afford high-priced petrol in this economy. That is the situation for now,” the IPMAN leader stated.

It was found that private depot owners previously sold PMS to independent marketers at a rate of N630-650 per liter, while the NNPC sold petrol to major marketers at a price below or around N600 per liter.

However, presently, major marketers sell petrol for under N650 per liter, while independent marketers sell it for between N750 and N800 per liter.

The leaders of IPMAN have repeatedly appealed to the NNPC to supply them with petrol directly, as it does with major marketers, but the NNPC has not yet responded to this request.

PUNCH findings reveal that some marketers are refusing to supply petrol to independent marketers due to limited supplies from the NNPC. This has resulted in higher prices and stock shortages for independent marketers, who own most of the filling stations in Nigeria, as private depot owners have raised the ex-depot price to N710 per liter.

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Solving Fueling in Abuja at the Expense of Other States and other other underlying causes

Several officials confirmed that on Friday, Nigerian National Petroleum Company Limited officials arrived at various depots in Apapa, instructing depot owners to prioritize fuel supply to Abuja, where fuel queues were first observed.

On Saturday and Sunday, many trucks were reportedly redirected to Abuja to alleviate the fuel queues in the FCT, leaving Lagos and other areas with limited supply. An official disclosed that the NNPC was rationing PMS to depots due to a fuel supply gap.

This comes just three days after a Reuters report claimed that Nigeria’s debt to PMS suppliers had exceeded $6 billion, doubling since early April, as the NNPC struggled to bridge the gap between fixed pump prices and international fuel costs.

Although the NNPC refuted this, the Reuters report stated that the national oil company began struggling earlier this year when overdue PMS payments exceeded $3 billion.

The report also mentioned that the company had yet to pay for some January imports, estimated by traders to be between $4 billion and $5 billion.

“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” said one industry source.

At least two suppliers reportedly stopped participating in recent tenders after reaching their self-imposed debt exposure limits to Nigeria, meaning they will not send more PMS until they receive payments.

It was also reported that Nigeria’s tenders to buy gasoline in June and July were smaller. According to sources quoted by Reuters, the NNPC will import about 850,000 tonnes in July, down from the usual one million tonnes in previous months.

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Fuel Scarcity in the Last One Year

May 2023

President Bola Tinubu’s inaugural statement on subsidy removal caused the pump price of petrol to rise from N184 per liter, the price before the speech, to N500 per liter immediately after his “subsidy gone” declaration.

October 2023

In October 2023, the Federal Capital Territory, Kaduna state, and other major cities faced a sudden fuel scarcity. Civil society organizations raised concerns about unstable petroleum prices due to NNPCL’s policy changes and alleged corruption, as currency volatility increased the landing cost of fuel to around N720 per liter for independent marketers.

November 2023

In November 2023, the FCT, Nasarawa, and some South-East and South-South states experienced another fuel scarcity that lasted several weeks. While oil marketers blamed the NNPCL for insufficient fuel supply, the NNPCL attributed the queues, especially in Abuja, to a “price war.”

April-May 2024

Nigeria faced fuel scarcity which lasted about two weeks. The Public Relations Officer of IPMAN, Chinedu Ukadike, attributed it to product unavailability.

He stated that it became challenging to source the product because most refineries in Europe are undergoing turnaround maintenance. Although Nigerian National Petroleum Company Limited, NNPCL, Ukadike also attributed the acute supply shortage to importation bottlenecks and the slow pace of marketers’ license renewals by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

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Preventing Fuel Scarcity in Nigeria: Strategies and Recommendations

1. Enhance Fuel Supply Chain Management

Efficient management of the fuel supply chain is crucial. This includes streamlining the importation process to reduce delays and ensure a steady supply of fuel. This could involve reducing bureaucratic hurdles and ensuring timely issuance of licenses by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Also, reducing dependence on a single importer, such as the Nigerian National Petroleum Company Limited (NNPCL), by allowing more private sector participation in fuel importation.

2. Increase Domestic Refining Capacity

The government should ensure that existing refineries are operating at full capacity through regular maintenance and upgrades. They should also attract private investments in building new refineries and modular refineries to boost local production of petroleum products.

3. Improve Infrastructure

The modernise depots and pipelines to reduce losses and ensure a smooth flow of fuel across the country. They should also improving road networks to facilitate the transportation of fuel from depots to filling stations, especially in remote areas.

4. Financial Stability and Currency Management

Currency volatility has significantly affected the landing cost of fuel. To mitigate this the government should mplement monetary policies that stabilise the Naira, reducing the impact of currency fluctuations on fuel prices.

Also, NNPCL and other importers should ensure timely payments to suppliers to avoid supply disruptions and maintain good relationships with international traders.

5. Transparency and Accountability

Regulatory bodies like the NMDPRA should be empowered to enforce compliance and transparency among market participants.

Mechanisms for public accountability, such as regular audits and publication of financial statements should be implemented to build trust and deter corrupt practices.

6. Consumer Protection and Price Regulation

Protecting consumers from price gouging and ensuring fair pricing are vital. The government should regularly monitor fuel prices and enforce regulations to prevent unreasonable price hikes by private depot owners.

7. Policy Consistency

Develop and maintain clear, consistent policies regarding fuel importation, pricing, and distribution.

Regularly engage with stakeholders, including marketers, depot owners, and civil society organizations, to ensure policies are well-informed and widely supported.