Nigeria’s massive importation of petrol
AS oil goes, so goes Nigeria, and there is perhaps no better indication of the state of affairs in the country than recent reports that Nigeria, officially one of the foremost exporters of crude oil in the world, is now also the world’s largest importer of petrol. To put Nigeria’s ignoble distinction in perspective: it is the only nation among the 15-member Organisation of Petroleum Exporting Countries (OPEC) to import petrol. Such, apparently, is the grim state of things that in January this year, Nigeria became the largest buyer of petrol from China. In that month alone, Nigeria imported 51,000 metric tonnes of petrol from the Asian giant.
A snap overview of the key statistics makes for sober reading and confirms that Nigeria has boxed itself into an economic corner from which a quick escape looks highly unlikely. For starters, according to the International Energy Agency (IEA), Nigeria produces about 2.53 million barrels of crude oil per day (bpd), well below its production capacity of more than three million barrels. But downstream is where things get trickier, as the country’s four refineries (two in Port Harcourt, and one each in Warri and Kaduna) only produce a combined 445,000 barrels of petrol day (bdp). How meagre is 445,000 barrels of petrol per day? It is 120 times less than the country’s daily need, which currently stands at 53 million litres per day (2018 figures), and rising. To make up for this egregious shortfall, the Nigerian National Petroleum Corporation (NNPC) imports one million tonnes of petrol per month, and has spent a total of $5.8 billion on fuel imports since late 2017.
How did the country arrive at this untoward and totally shameful pass? According to the NNPC Group Managing Director, Maikanti Baru, the blame should be laid at the doorstep of “unpatriotic marketers” who “are exploiting both land and coastal borders to smuggle out petroleum products meant for the Nigerian market to other West African countries.” Mr. Baru has a point. The disparity in the price of petrol between Nigeria and neighbouring countries incentivizes smuggling. Yet, it is difficult for any sober observer to accept that smuggling is the reason fuel shortage has become perennial in the country. If, indeed, smuggling is a serious problem, it stands to reason that the way to deal with it is to curb it. The NNPC Group Managing Director also attributed the corporation’s recourse to importation to the inability of the major and independent marketers to import petrol “because of the high landing cost which made cost recovery and profitability difficult owing to the regulated price regime.” Again, while there may be some truth to this, it does not address why, ab initio, independent marketers needed to import petrol.
If the activities of smugglers and the failure of independent marketers are a red herring, the elephant in the room is the state of Nigerian refineries. Since 1999, every successive administration has made the revamping of the refineries a priority and budgeted humongous sums towards it. Why are the refineries still operating well below their installation capacities? The NNPC is currently in talks with Italian, American, Spanish and Nigerian consortia for yet another round of upgrades on the refineries. When will these seemingly interminable upgrades end?
In a 2018 interview with the British Broadcasting Corporation (BBC), Minister of State, Petroleum Resources, Ibe Kachikwu, vowed to resign if, by 2019, work on the refineries was not completed. Said Mr. Kachikwu: “2019 is the target time… I target 2019. If I don’t achieve it, I will walk (resign).”
Will Mr. Kachikwu honour his word?