Why Nigeria remains riddled with long fuel queues

VENTURES AFRICA – Two weeks ago, importers of petroleum products into Nigeria embarked on a week-long strike action over the non-payment of fuel subsidy arrears amounting to N158 billion ($790 million). The action caused an acute shortage of petrol in Nigeria’s major cities, which resulted in long queues and a significant disruption to normal living. Although the Federal Government responded by claiming it had pay off the marketers, petrol is yet to be freely available.

Speculations are rife that international traders and local marketers are backing away from further imports over concerns that the cash-strapped new government will terminate subsidy payments. Consequently, new bookings for imports of petrol into Nigeria have slowed terribly, and some cargoes offshore are reportedly being redirected to other regions. “We have exhausted our stocks,” a local gas station worker to Ventures Africa over the weekend. “We thought government and marketers have resolved their issues but supply is very slow in coming,”

The country consumes about 40 million litres of petrol per day, an amount far above the capacity of its half-functioning refineries to produce. This process cost the government about N914 billion ($4.6 billion) in 2014. This year alone, the bill for fuel imports stand at around N300 billion ($1.5 billion). As President-elect Muhammadu Buhari is yet to reveal his plans for subsidies, a lot of uncertainties still surround the issue, a key reason marketers have decided to hold off from further importation.

The fuel subsidy regime in Nigeria is a volatile and controversial subject. When an attempt to remove the subsidies was made in January 2012 by the current administration, riots were seen across the country. However, with the significant oil price drop, a removal of subsidies would have lessened the burden on consumers as petrol prices would only increase by about 32 percent to N115, from N87.

Earlier in the year, experts had recommended that oil-based economies leverage the drop in oil prices to slash subsidies from their budgets and create the fiscal space for development-driven expenditure. A number of countries including Angola and Indonesia have so far played this card, but oil prices are slowly rising again, suggesting a potential loss of opportunity for countries like Nigeria who are yet to make this move.

“The time to cut was January/February, when oil prices were so low,” said Stanislas Drochon, Director of Africa oil and gas at the IHS. “That was really a missed opportunity, but it’s not too late.”



By Emmanuel Iruobe