NNPC’s petrol consumption figure scam

The Nigerian National Petroleum Corporation (NNPC) stirred the hornet’s nest last week with its official figures on daily consumption of petrol in Nigeria. The corporation said that Nigerians burnt 38.65 liters of petrol daily in January 2020.

There were no explanations for the massive drop in NNPC’s petrol consumption figure. In January the economy was still blasting at full throttle, so no one can blame COVID-19 for the drop in the consumption figure conjurred by NNPC. Oil industry watchers are familiar with NNPC’s devious figures on petrol consumption.

A few months after the removal of petrol subsidy in May 11, 2017 which moved the pump price of petrol from N87 to N145 per liter, NNPC announced that daily consumption of petrol in the economy has dropped to 28 million liters per day. That was on December 2017.

Sometime in February, 2018, barely two months after the announcement of the drop in consumption to 28 million liters, NNPC claimed that consumption had suddenly surged to 50 million liters per day. The surge in consumption occurred just as consumers were battling to adjust to the spike in the pump price of the commodity.

The economy was still labouring to climb out of recession and there was no way consumption of petrol could suddenly double. Ironically the corporation’s alibi for the mysterious spike in consumption was a resort to an anomaly Nigeria has battled for decades.

NNPC claimed that the consumption figure doubled because petrol was smuggled through the porous borders into the markets in Nigeria’s tiny neighbours to the west.

No one believed the story because Nigeria’s petrol is always smuggled into Benin, Togo, Niger and Ghana. Besides, the quantity of petrol consumed in the four countries in a month is less than what is used in Lagos in a day. Even if the four countries depended totally on Nigeria for fuel supply, the situation could not have doubled consumption. When Femi Falana demanded details of import figures to justify the mysterious surge in consumption, NNPC said it was trade secret which cannot be published.

NNPC was actually telling lies with its figures because it needed to rake in money from its duplicitous under-recovery policy which was coined to cover up the fraud in petrol subsidy.

The scam worked throughout the period NNPC had monopoly of petrol imports. Now COVID-19 has driven down demand for crude oil and consequently pushed prices perilously close to Nigeria’s production cost, thus reducing the landing cost of petrol below N100 per liter.

The petrol consumption figure released last week is meant to prepare the ground for the keen competition foisted on the industry by COVID-19.

With the drop in the landing cost of petrol, private marketers are licensed to import petrol. The first consignment of petrol imported by private marketers might hit the shores of Nigeria in a matter of days. The decision of NNPC to reduce the ex-depot price of petrol from N113 to N108 was obviously informed by the fears that private marketers might rock the market when their consignments of petrol arrive.

Everyone knows that the figures NNPC flaunted as daily consumption figure on petrol was fake.  It served its purpose as long as petrol subsidy lasted. Now COVID-19 has taken the wind off the sail of the dubious subsidy scheme. NNPC has no option than to tell the truth.

That, however, does not mean that Nigerian consumers of petrol would benefit from the competition foisted on the downstream sector of the oil industry by COVID-19 and the consequent collapse of crude oil prices.

Petroleum Products Pricing Regulatory Agency (PPPRA), the government agency charged with the dormant role of fixing the pump price of petrol, has doubled retailers profit margin and kept the pump price above the dictates of market forces. 

PPPRA promised in March, 2020 that it would be reviewing the pump price of petrol monthly in accordance with changes in crude oil price.

Unfortunately, that was the last time anyone heard from the redundant and devious regulator.  PPPRA has led the downstream sector of the oil industry into a crucial price war and abandoned it at the peak of battle. Even the profiteering retail outlet operators are waiting for someone to issue directives on the pump price of petrol as ex-depot price plummets. Unfortunately PPPRA is too slow to take the lead.

Two weeks ago, after NNPC treacherously reduced the ex-depot price of petrol from N113 to N108 per liter and maintained sealed lips on the pump price, retailers called on PPPRA to fix the new pump price of petrol.

The regulator maintained a studied silence till yesterday when it belatedly published a pump price that gives retailers undue advantage. 

Nigerian consumers of refined petroleum products are endangered species. They have no one to defend them against fraudulent and profiteering importers and retailers. 

When the federal government magnanimously reduced the pump price of petrol from N145 to N125 per liter, PPPRA told curious consumers that the pump price of diesel would remain at N220 per liter because it was fixed by the inter-play of market forces of demand and supply.

NNPC’s reduction of the ex-depot price of petrol inadvertently exposed PPPRA’s transparent lie. The pump price of diesel and kerosene are fixed by heartless importers and retailers with the tacit connivance of PPPRA. Without PPPRA’s connivance, the interplay of market forces of demand and supply would have taken the pump price of diesel down to N115 per liter as the landing cost tumbles below N100.

Unfortunately for Nigerian consumers of the products, the invisible hand of PPPRA on the price mechanism of diesel and kerosene has kept them artificially high.

What PPPRA was carved out to do is something 10 hard-working men could do in a unit of the Pipelines and Products Marketing Company (PPMC), a subsidiary of NNPC in charge of the pipelines through which refined petroleum products are pumped to storage facilities.

PPPRA is therefore a colossal waste of government resources. At a time when the federal government cannot raise 50 per cent of the revenue for the 2020 budget, PPPRA should not be allowed to waste scarce resources. It should be scrapped.

The N1.6 trillion the regulator conspired to dole out to dubious petrol importers in 2011 as subsidy for fuel that never reached the shores of Nigeria is enough pain on a dejected economy. PPPRA is totally useless to Nigerian consumers of refined petroleum products.      

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