Kachikwu’s fuel subsidy figures, by Jerry Uwah




A tenuous calm in the nation’s petrol supply chain in the last three weeks has momentarily punctuated the long, winding queues at retail outlets. Motorists could once again drive into fuel retail outlet, top up and head out within 10 minutes. The supply situation is so buoyant that some retail outlets now sell as low as N143 per litre even as the Nigerian National Petroleum Corporation (NNPC) claims to be paying N14 per litre of petrol as subsidy. Marketers are no longer hoarding petrol because they are sure the supply at the depots can guarantee the next purchase.
The logical conclusion therefore is that the four-month scarcity was the consequence of a calamitous supply deficit rather than hoarding or diversion. No sane businessman hoards a product that is in sufficient supply. That brings us to the humongous figures flaunted by NNPC as daily petrol consumption figure and expenses on subsidy. Maikanti Baru, the corporation’s group managing director claimed on March 5 that petrol consumption has doubled to 50 million litres per day due to smuggling and that NNPC was spending N774 million daily on petrol subsidy.
Last Thursday, Ibe Kachikwu, the minister of state for petroleum and Baru’s boss shocked the world when he claimed that NNPC spends N1.4 trillion annually on petrol subsidy. NNPC calls it under-recovery. Kachikwu’s figure is widely at variance with Baru’s. By Baru’s claim, annual petrol subsidy hovers around N284 billion. Kachikwu probably added the colossal losses recorded by NNPC on the operations of the four dilapidated refineries to arrive at N1.4 trillion as annual petrol subsidy. The corporation is just throwing figures at a docile populace because no one cares to verify their claims. At the peak of petrol scarcity, NNPC said it was importing petrol at N171 per litre and selling to marketers at depot price of N133. That puts subsidy at N38 per litre.
The figure suddenly dropped to N14 in March even as crude oil price was inching up. Kachikwu’s new figure has taken subsidy perilously close to N100 per litre. Baru and Kachikwu are not transparent on petrol consumption figures and cost of subsidy. The total consumption of petrol in Benin, Togo, Niger and Chad republics, the four impoverished countries bordering Nigeria, is less than what is consumed in Lagos daily. Smuggled petrol constitutes a very tiny fraction of what is consumed in those countries because they all import large quantities of the commodity. Besides, Niger Republic has a refinery which exports its excess diesel to northern Nigeria. Petrol smuggling has been with us for more than 30 years.
The effect of the crime is only noticed in times of crippling supply deficit like the one between October 2017 and February 2018. It pales into insignificance when the bottlenecks on the supply chain are removed. Motorists buy petrol withease now because NNPC has upped the supply ante. It is not because the Nigeria Customs Service (NCS) and Nigeria Immigration Service (NIS) have blocked the bush tracks through which smugglers ferry petrol in 50-litre plastic containers into the four neigbouring countries.
It is not because NCS has closed the official border gates against the giant articulated trucks that ferry 33,000 litres of petrol each into the four countries. The complaint would resurface the moment the supply deficit worsens. So long as NNPC remains the sole importer of petrol, the delicate supply balance could snap any moment bureaucracy inhibits it. Someone has to work out a subsidy funding formula that would enable members of the Major Oil Marketers Association of Nigeria (MOMAN) and Independent Petroleum Marketers Association of Nigeria (IPMAN) to import petrol and sell profitably at the decreed official pump price of N145 per litre.
The federal government has to approve one of the three suggested options of funding petrol subsidy for private marketers to pre-empt the return of the crippling supply deficit that goaded NNPC into defending its inefficiency by assaulting consumers’ eyes and ears withexaggerated consumption and subsidy figures.
Three options are currently on the cards. The first is for the Central Bank of Nigeria (CBN) to bear the fuel subsidy burden by selling foreign exchange to private marketers at the rate of N204 to the dollar. The second option is derisively tagged moderated deregulation. Under it, NNPC would import 30 per cent of the fuel consumed in the country and sell at N145 in its retail outlets strewn across the country, while private marketers import 70 per cent of the product and sell in their retail outlets at open market pump price which might be as high as N180. What probably is the third option is being worked out by the Petroleum Products Pricing Regulatory Agency (PPPRA).
PPPRA is reviewing petrol pricing template with a view to hacking down the cost of logistics and probably marketers’ margin in a desperate bid to ensure that marketers import fuel and sell profitably at N145. From all indications, subsidizing fuel imports for marketers from the forex end sounds more plausible and easy to monitor.
CBN could pay the cost of the imported petrol directly into the accounts of the foreign refineries through which the marketers would bring in the commodity. That would circumvent the possibility of round-tripping by marketers.

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