Grimot Nane Zine

There Is No Fuel Scarcity Cartel in Nigeria

While there is a clearly identifiable oil production and exploration (E & P) ‘cartel’ constituted of mostly multinational corporations (with local clients) in the upstream sector of the Nigerian petroleum resources industry, such does not exist in the downstream sector relating to the distribution of fuel products. What causes fuel scarcity is the result of the actions and reactions of a ‘cabal’ of government officials and their clients in the private sector; such corporate clients are erroneously perceived as cartel members.

Cartels consist of a collusion of corporate competitors that fix the market (prices and conditions) for profit while the cabals (in question) consist of a collusion of government officials who also fix markets for their own private interests. Cartels are private sector entities while cabals are public sector counterparts. The distinction between cartel and cabal is important.

There many non-government players in the fuel distribution chain which the Government of Nigeria (GON) has accused of being responsible for causing fuel scarcity in the country. These include many oil market associations such as marketers who are importers and wholesalers of fuel products (e.g. he Major Oil Marketers Association of Nigeria [MAMON]); trade unions (TUs) who represent public sector oil workers interests (e.g. the Nigeria Union of Petroleum and Natural Gas Workers [NUPENG] and the Petroleum Tanker Drivers [PTD]). At other times, Niger Delta militants have also been held responsible for fuel scarcity due to pipeline sabotage activities.

Many questions have to be raised concerning veracity or logic behind the accusations of these groups by the GON. Firstly, why would fuel marketers and retailers refuse to engage in business activities that would yield them significant profits on a consistent basis? Fuel marketers have to import fuels paying with cash (in US dollars). Nigeria does not have too good a reputation with international transactions and as such are denied good credit facilities. Subsidies have been given by NNPC (Nigerian National Petroleum Corporation) to the marketers in naira but foreigner fuel marketers and refineries want dollars which the GON is not providing. Are fuel marketers also “magicians”?

Secondly, trade unions (TUs) are typically transparent in their demands. TUs go on strike primarily to seek better ‘working conditions’ and pay for workers or better industry functioning. Once the TU’s demand is met or renegotiated the strike is called off. Is it not true that oil and gas sector workers in Nigeria engage their profession in the worst conditions in the world? Is the state of disrepair of the refineries not worth striking over? There are routine incidences of fuel tanker drivers transporting fuel on ‘unmotorable’ roads falling over or crashing into potholes and spilling fuel sometimes causing fire disasters. Unfortunately, “driver error” is usually blamed for such incidences and not the deplorable condition of the roads. Is it wrong for PTD to protest working under such conditions? The reliance on very bad roads for fuel transportation is neither a winning nor practical policy of the GON. But where are the strikes?

Thirdly, resorting to accusing the Niger Delta militants of being responsible for fuel scarcity is an embarrassing ‘cop out’. Nnimmo Bassey, a prominent environmental campaigner since the current GON announced the clean-up of the Niger Delta would begin several months ago, has reported in the mainstream and social media numerous cases of oil spillages. The GON characteristically did not take any notice. Then NNPC ‘magicians’ suddenly found it exceedingly convenient to blame pipeline sabotage by militants for disruption to fuel supplies. If there were no fuel scarcity crises pipe leaks, deliberate and inadvertent, would never have mattered to the GON. Clean-up announcements are back but the necessary action very doubtful.

Then there are the governmental players in the downstream of the oil sector. NNPC is the state regulator of the petroleum industry. For crude oil to become fuel the following procedure in undertaken by NNPC and its subsidiaries. NAPIMS (National Petroleum Investment Management Services) sends the crude oil via pipelines to PPMC (Pipelines and Product Marketing Company) which in turn sends it to the dilapidated refineries. Then the problem begins. At best Nigeria’s four state-owned refineries produce no more than 30% of their combined capacity. As such NAPIMS and PPMC play a very big but surreptitious role in oil bunkering because the rents from local refining are too small. To boost rents in the downstream petroleum sector and meet local demand for fuel, it has to be imported.

The DPR (Department of Petroleum Resources) has always struggled to enforce pump prices. The PPPRA (Petroleum Product Pricing and Regulatory Agency) is the agency responsible for the pricing of locally refined and imported fuel. Recently, the GON and PPPRA priced fuel products in such a manner that fuel marketers / importers would lose N7/litre instead of make a profit. The only incentive to go into business is to make profits.

The GON officials who make up the ‘cabal’, on a permanent or temporary basis, include ministers and ministerial staff, presidency bigwigs, senators, representatives, state governors and ranking NNPC officials. They are the ones that tamper with fuel subsidy funds, divert crude oil revenues, refuse to back letters of credit with dollars, plunder import guarantee funds etc. in this GON and former ones. It all amounts to missing billions of dollars. Investment in the downstream sector is a perpetual ‘avoided cost’ of the GON and upstream investment is always outsourced to multinational corporations.

These same officials of the GON and NNPC expect to provide an efficient, reliable and modern fuel supply chain in Nigeria whereby (1) oil marketers / retailers make perpetual losses, (2) no dollars are not made available to purchase dollar-requiring fuel products from overseas, (3) the road are dangerous for fuel transportation, (4) oil and gas workers work under deplorable working conditions and (5) the refineries are largely redundant and rusting. Yet, the GON and NNPC officials expect their lucrative extortions, rents and thefts  to continue to get bigger and more secure.

Tell us; is it the cartel or the cabal responsible for fuel scarcity? No one said ridding Nigeria of its pernicious governance problems is going to be easy but it looks as if the current GON have not even started, for all their well-orchestrated rhetoric and highly incisive ‘blamocracy’. IPMAN (Independent Petroleum Marketers Association of Nigeria) has magically accepted the blame for the fuel scarcity crisis but that does not alter the very poor state of the downstream oil sector nor untransparent and corrupt practices that linger on in the industry. Is IPMAN the voice of a cartel or the voice of a client to a cabal?

A pump price hike for fuel is on the way! It is time to celebrate!

Grimot Nane

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