SOLVING THE PERENNIAL FUEL CRISIS: WHAT ANRP WILL DO DIFFERENTLY, HOW AND WHY
Long petrol queues along with the agony and hardship caused by fuel scarcity have been with us for four decades. This scourge is more aggravating because we are an oil producing country and should never experience such embarrassments and inconvenience.
The Abundant Nigeria Renewal Party (ANRP) believes and knows as of fact that this seemingly intractable fuel scarcity crisis can be resolved once and for all. We therefore present our understanding of the nature and causes of the crisis, and offer sustainable solutions that we will provide to end the fuel scarcity crisis permanently, never to be experienced again in Nigeria, what we will do, how we will do it, and why.
B. CAUSES OF THE FUEL CRISIS
1. Opaqueness and lack of transparency within the government, leading to massive corruption, irregularities, and general distrust.
2. Insistence on practices that are not working.
3. Lack of adequate indigenous capacity and capability (manpower and especially technology) for exploration, production, refining, etc.
4. Bureaucracy and an ineffective public sector characterised by inefficiency, lack of accountability, no value for money in orientation and operations.
5. Lack of patriotism, also vested interests sabotaging the collective, overall good of all by a select few.
6. Poor fiscal, monetary, and legal frameworks to encourage growth and massive investment in refineries and efficient supply networks required to meet growing local fuel demand which is presently at 35 million litres per day.
7. Inefficiently and poorly run refineries by government officials. The government-owned refineries have been working at less than 40% capacity, characterised by decades of failure.
8. Collapse or total rundown of existing refineries and supply networks affecting adequate production and distribution of refined products.
9. Inadequate and underutilised strategic reserves as backup for cases of scarcity, crisis, or emergency.
10. Unavailability of foreign exchange (forex) for transactions, as well as inconsistent and discriminatory forex rates.
11. Reliance on fuel imports to fulfil our domestic needs.
12. Problems associated with government price fixing and subsidy payments.
C. HOW SUCCESSIVE GOVERNMENTS HAVE FAILED THE PEOPLE TILL DATE, AND UNDERSTANDING THE PETROLEUM INDUSTRY BILL (PIB)
The Nigerian National Petroleum Corporation (NNPC) has failed for decades. From its very poor operation of refineries, to abysmal performance in many of its other subsidiaries, to corruption, to not providing adequate oversight on behalf of the federal government; to failing to adequately account for oil revenues or even remitting same to the right government coffers; to being unable fully account for the oil and gas we produce after all these years. Down to failing to honour agreements with industry operators. For instance, reneging in paying joint venture (JV) cash calls with international oil companies (IOCs). In a joint venture all the parties bring their share of the budget, when the profit comes they share it as well. NNPC hardly ever brings their money, fails to pay or pays IOCs after a long period of defaulting. There are also suspicions of the NNPC overbilling in the process.
The Petroleum Industry Bill (PIB)
The Oil and Gas Industry Committee (OGIC) composed of industry stakeholders (workers, business owners, unions, etc), experts, and veterans (both in and out of government) was set up by the then president in April 2000 to take a comprehensive look at Nigeria’s oil and gas sector, to offer the best ways of managing the industry for maximum output. The recommendations formed the basis of Petroleum Industry Bill which has been subjected to further reviews and adjustments. Only a section of it, the Petroleum Industry Governance Bill was passed by the senate in May 2017, after 17 years (even this section is not a law yet as it had not yet been passed by the House of Representatives, nor signed into law by the president).
The bill in its original form seeks to:
I. close down NNPC and create 3 successors: the Nigerian Petroleum Regulatory Commission, Nigerian Petroleum Assets Management Company, and National Petroleum Company.
These 3 will be efficient and effective agencies so that rules will be obeyed, nobody will be cheated or taken advantage of. Businesses will not connive to increase prices as they like, or cause scarcity. They will also help the government raise money instead of losing it through corruption, and other factors as is the case;
II. deregulate the downstream petroleum sector (ie refining, transporting, and selling at filling stations).
To deregulate means that NNPC, the government and civil/public servants will not be involved in this aspect, but businesses with the required expertise and approach will;
III. create a conducive business environment for petroleum operations;
VI. protect health, safety and the environment in petroleum operations; etc.
The general consensus is that the PIB if passed and sincerely implemented would have solved most of the problems that cause fuel scarcity.
D. UNDERSTANDING GOVERNMENT FUEL SUBSIDY PAYMENTS, PRICE FIXING; AND DEREGULATION
The price of crude oil and refined products like petrol are determined by the international oil market, not in Nigeria, therefore the prices fluctuate according to forces outside of our control. Nigeria is presently exporting crude oil and importing petrol. Due to this price increase in the international market, the present forex rates, and inability to easily access forex, only NNPC (and its partners on its behalf) is importing. The current import cost of petrol into Nigeria is N171.40 per litre, but the official fixed price is N145 per litre. This means that NNPC is losing N26.40 per litre (in other words NNPC is subsidising fuel at N26.40 per litre).
At our present consumption rate of 35 million litres per day, it means the FG is subsidising (or losing) N924 million daily. Where is the N924 million coming from? Where will we get it to pay? These amounts sometimes accumulate and run into hundreds of billions of naira. The importers owed then go on strike to demand for their payments. This also causes fuel scarcity.
The other problem experienced with these fuel subsidy payments to the tune of hundreds of billions of naira yearly is, corrupt government officials connive to claim subsidy payments for products only delivered in part not delivered at all. Many times, the products are diverted to neighbouring countries. The corruption is endemic.
Because the market fluctuates, the FG is never able to budget for fuel subsidy payments in the coming years because the amounts can hardly be determined ahead of time.
Price fixing by the government has not worked, and is not working.
The unanimous alternative industry expert agree on, is for the FG to give businesses that can the liberty to source for refined products (preferably refined locally within Nigeria), to distribute, and sell at their determined prices at a fair profit margin. The FG should concentrate on enabling the business environment by ensuring a stable economy, reducing or actually eliminating uncertainties; ensuring that policies are consistent; and by regulating the sector to ensure compliance with best practices. Also ensuring that the judiciary, law enforcement and other enablers are all working in sync to prevent and punish sharp practices.
This ‘deregulation’ they argue worked for the telecommunications industry. Without the government fixing prices, the price of SIM cards, call rates, and data bundles have been dropping due to increased competition. This, they insist has worked for diesel too. There is hardly any diesel scarcity, long queues, suffering and hardship in getting it. The question is, Why is this not the same for petrol.
E. THE CHOICE BETWEEN TWO OPTIONS
Realistically speaking there are two choices before Nigerians to address this scourge of fuel scarcity.
Option 1 : Fuel prices can be fixed with the FG paying up for shortfalls in a Nigeria where there is no corruption or negligible. Where NNPC is performing at international standards/best practice. All our borders are secured so that there is no diversion of products. The justice and law enforcement systems are fast, efficient and reliable. The refineries owned by the government are operated properly, professionally for maximum output.
Option 2: Government is no longer running or operating refineries but allows and/or partners with the private sector which has the right attitude and acumen to run them well. Competition is allowed to determine petrol pump price. The government regulates the industry and uses the taxes paid by these companies as revenue into government coffers.
For us at ANRP, Option 2 is most realistic for now. This for us is not a matter of ideology, but as constructive pragmatists, it is a matter of what works, with the support of verifiable evidence.
Given the opportunity, we shall go for Option 2, as we work towards a public sector that can deliver Option 1 in the nearest future.
To be sure, Malaysia has Petronas, Brazil, Petrobras both government-owned corporations performing excellently and competing with IOCs. For now, NNPC cannot deliver anything close to these results, therefore the perennial fuel crisis for the last 4 decades.
F. WHAT ANRP WILL DO TO PERMANENTLY END THE FUEL CRISIS IN NIGERIA
Given the opportunity to win elections and be Nigeria’s leading party in government with dominant authority in executive and legislative positions we will:
I. immediately pass, sign into law, and honestly implement the PIB in its entirety.
The FG will be the enabler of the private sector to run a competitive industry environment, and also the firm regulator to ensure fair play and to enforce standards and practices, and also be involved in strategic investments in the industry. Government-owned refineries will be operated through private-public partnerships with competent companies that understand the business to run them gainfully and productively; etc;
II. prioritise and promote local production towards self-reliance;
III. issue licences for modular refineries, and regulate production therefrom for optimal output, environmental protection, and eliminate waste. Instead of tagging them ‘illegal refineries’ we shall help standardise, and promote them, and also work with communities to create numbers of small refineries especially in the oil-producing areas;
IV. develop indigenous capacity and capability in the sector. We shall support and fund it. This will be done among other means by solidifying the collaboration and partnership between government, industry/business, and academia. Petroleum institutes, and universities will be optimised. Our universities and polytechnics would begin to develop a series of initiatives especially in the area of refining;
V. work to reduce the dependence on petrol through providing steady electricity (to reduce to the barest minimum the use of generator sets); and also efficient public transportation system especially railway to reduce the use of automobiles which depend on petrol. Gas will be mostly used to power large turbines to provide electricity, for industrialisation, cooking, etc;
VI. eliminate the use of bulk road vehicles (BRVs) to transport petrol but rather railway and pipeline networks;
VII. review the entire value chain from the upstream (exploration and production of crude oil) to the midstream (gas processing) to the downstream (servicing, refining, distribution, retailing) sectors to ensure that they are all aligned with no disconnects in between. Licences will enable upstream sector players for instance, to themselves carry out downstream sector activities, instead of segregating them. Oil companies will provide for their energy needs and also contribute to their communities and to the grid;
VIII. ensure and guarantee availability of foreign exchange for all legitimate transactions. We intend to rely on technology to ensure the removal of sharp practices and also enable banks to become more active agents in this regard. Large players like oil companies will be enabled to deal transparently with banks in order to further liquefy the market;
IX. increase the storage capacity of our strategic reserves and ensure to have products to last for six months to one year;
X. develop other areas of our economy (with special emphasis on human capital) in order to wean us off our fixation on oil and gas;
XI. deal honestly and transparently with Nigerians. Where there is difficulty, we will come clean. We have nothing to hide or interests to protect aside from the common good of all.
Do not despair. Do not be an onlooker. Join ANRP www.anrp.org.ng together, we can make our country work for us all.
National Vice Chairman