Here Comes another Fuel Crisis

Simon Kolawole Live!

Lucky me. As I stepped out of church last Sunday, reports of a looming fuel crisis started playing on my mind. I gently drove to a filling station, loaded my tank and triumphantly headed home. It was N97 per litre, thank God. The following day, I went out with my wife’s car and decided to fill up the tank to be better prepared for the crisis ahead. Alas, I was told to pay N110 per litre at a filling station along the Lagos-Ibadan Expressway. “Not so fast,” I mumbled and left the station, not too sure if I was taking a hopeless gamble. It worked. I got petrol for N100 per litre a few metres away. With our cars now fully loaded, I was ready to confront the week ahead like a warrior.

Then, I paused. What’s going on? A few weeks ago, there were fuel queues in Abuja. Now, Lagos has joined the queue. The official line was that because of a broken pipeline at Arepo, Ogun State, supplies were being affected. I decided to dig deeper. There was no broken pipeline in Abuja, yet the city is experiencing shortages. I made a few calls to those who should know the true picture. It became clear to me that there was more to it than meets the eye. Somebody put it more brutally: “The current shortage is a tip of the iceberg. If care is not taken, we are going to be in this till December.” I sighed.

What are the issues? I will try to simplify things as much as possible. Last year, there was this fuel subsidy scam that rocked Nigeria. I call it “the biggest fraud in the history of Nigeria”. Dubious characters were given licences to import fuel. Most of them did not import a drop. But with the connivance of banks and government officials, non-existent vessels offloaded non-existent fuel for onward transmission to non-existence tank farms. The subsidy bill came to about N2.19 trillion for 2011 alone. Private jets (now fondly called “PJ” by the nouveau riche) flooded the tarmacs of our airports, most of them owned by the emergency “subsidy billionaires”.

After seeing the hefty bill, President Goodluck Jonathan decided—in anger, I suppose—to remove fuel subsidy. Many of us cried foul, maintaining that we must first distinguish between “fuel subsidy” and “fake subsidy” before deciding on the way forward. There were massive public protests against the increase in petrol price. Truth be told, Jonathan has not recovered from the damage the protests inflicted on his relationship with ordinary Nigerians. Nevertheless, he sought to address the concerns raised by many well-meaning Nigerians on how to tackle the scam. The new Executive Secretary of the Petroleum Product Pricing and Regulatory Agency (PPPRA), Mr. Reginald Stanley, moved to sanitise the import regime.

To be fair to Stanley, he has set up an effective system to check the fraud. Some of the measures include appointment of independent inspectors of imported products; submission of financing documents by marketers; submission of contractual agreements between marketers/importers and traders/suppliers; a satellite-based monitoring of vessels bringing products to Nigeria; etc. He inherited an unwieldy list of 125 importers. New qualification and verification measures have reduced that to just 39. From a volume of 5 billion litres of petrol imported in the first quarter of 2012, importation is down to 4.20 billion litres in the third quarter. Daily consumption has crashed from the bogus 59 million litres per day to about 30 million litres now.

The Aigboje Aig-Imoukhuede Committee did a great job of identifying the suspected subsidy scammers. The names of the indicted marketers/importers, some of them very powerful individuals, were made public. The tighter measures put in place by the PPPRA, along with the Budget Office and the Debt Management Office, were implemented by the Ministry of Finance, which now verifies subsidy claims, unlike before. And we’ve seen good results. For instance, as at June 2011, government had paid N1 trillion as subsidy for the year. But as at August 2012, government had paid only N78.8 billion, although with N43.25 billion still outstanding after the settlement of another N56.75 billion last week. Put together, that is N178.8 billion only for eight months. At this rate, the actual subsidy bill for 2012 could be about N300 billion, compared to N2.19 trillion last year! Not even the increase in pump price from N65 to N97 per litre can explain the huge difference. We were just being ripped off in the past, simple as that.

Now, why should there be fuel shortage now? That takes us to another issue: the Federal Government was obviously trying not to overshoot the subsidy vote in the 2012 budget. With no realistic data from the petroleum industry amidst allegations of fraud, the government had decided to play safe by using consumption figures of 2009. It initially arrived at N1.314 trillion for this year, but revised it to the poetic N888 billion after the increase in petrol price in January. It was a safe thing to do then amidst public anger over the subsidy scam.

But it soon dawned on the government that the figure might be insufficient. The governor of the Central Bank of Nigeria (CBN), Malam Sanusi Lamido Sanusi, was the first to raise the alarm. Roughly N450 billion of the N888 billion subsidy vote for 2012 is for 2011 arrears alone! The government inevitably ran into the dilemma over how to pay the genuine importers whose claims have been verified under the new regime, with the products already consumed. With this delay in the payments, many marketers developed cold feet. They drastically scaled down or stopped importation altogether to protect themselves. Put simply, we are not importing enough to meet consumption. That, in a large nutshell, is what is responsible for the latest fuel queues.

Last week, finance minister, Dr Ngozi Okonjo-Iweala, moved to douse the crisis by paying more verified claims for 2012. Hopefully, this will ease the supply crisis. It seems the subsidy bazaar is coming to an end. But the genuine importers and marketers are, without a doubt, justified to ask for their pay. And unless they are paid consistently and on time, the crisis will continue in different episodes.

And Four Other Things...

Quiet Qaqa
Last weekend, the joint military task force claimed to have attacked the hideout of Boko Haram militants in Kano and killed key leaders, including “Abu Qaqa”, who regularly issued statements on behalf of the group. Although I would readily concede that the security agencies are trying their best given the serious limitations hampering their operations, I was a bit sceptical about the “Abu Qaqa” matter. But given that the killing is yet to be denied by “Abu Qaqa” himself, maybe there is some truth in it. In which case, we must continue to encourage and support the agencies to keep it going. We shall win the war. It’s winning the peace that I doubt.. 

The N5000 Question
So, President Goodluck Jonathan has suspended the introduction of the N5000 note. While I still can’t understand the sense behind the protests against the new note, I blame the CBN governor, Malam Sanusi Lamido Sanusi, for not doing his homework before going to town. I am amazed that, not for the first time, he did not consult or carry along the critical stakeholders in taking certain decisions. All I could see was a fire-brigade approach after the act. Nevertheless, I’m worried that CBN’s duties and functions are now being subjected to political interference. Soon, the National Assembly will ask the CBN to increase lending rate.

Jonathan and His Critics
Who is going to mediate between President Goodluck Jonathan and his critics? The other time, his spokesman, Dr. Rueben Abati, took them on headlong. Then the critics fired back. And now the president himself has come out again, blaming the January protests against removal of petrol subsidy as the handiwork of opposition politicians. Somebody should please help me whisper to the president that globally, it is part of the job description of the opposition to take advantage of any situation that presents itself to criticise the sitting government. Oh yes!

Arik and the Minister
Someone please tell me the spokesman of the Minister of Aviation did not describe Arik as an “ailing airline”! Responding to allegations that the minister, Princess Stella Oduah, was giving the airline hell because of personal interests, the spokesman was reported as saying: “Why will the minister want to have a stake in a business that is not thriving?” I believe such statements shouldn’t come from a representative of the Federal Government, but I worry more about the state of the aviation industry in Nigeria. Aviation oils economic activities everywhere in the world. We are in for a tough time.

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