The Bricklayer’s Guide to Understanding Nigeria’s Persistent Fuel Scarcity


Some of you have sat in fuel queues over the last couple of weeks, sweltering in the heat, wondering why in a nation so blessed with milk and oil, we frequently run into the issue of fuel scarcity. Here’s some basic information to making sense of it all. Let’s start by correcting this notion of ‘fuel scarcity’. The word ‘scarcity’ makes it sound like it’s an availability issue…like Nigeria runs out of oil whenever fuel scarcity occurs. However, the problem is less of oil availability and more of how the oil gets to the consumers.

The Cost of Getting From A-Z

The process through which oil gets from the shores of Nigeria to the tank of your car is where the issue of fuel scarcity sets in. Nigeria’s oil downstream sector frankly has too many cabals, that like a Russian doll, has cabals within cabals. If you’re not dealing with the Major Oil Marketers, you’re dealing with the Road Transport Owners or the Petroleum Tanker Drivers or the Union of oil workers, or some group within this group of groups.

These marketers and the other cabals take care of the process of importation till delivery of fuel at the stations, then the Government pays them enough to cover their costs plus the subsidy on price of fuel a.k.a subsidy claims. In case you’ve forgotten, Government does this to keep prices of oil products below what they would otherwise be in a free market system.

As is obviously the case when a number of cabals and a lot of money are involved in Nigeria, things hardly ever go smoothly. At some point, someone starts to complain about not getting paid. Fuel subsidy claims constitute the major reason for fuel scarcity issues, but strikes by any of these cabals can range from that to management of pensions to whatever catches their fancy. And if these cabals fight amongst themselves or with Government, we experience fuel scarcity.

The latest complaint by the Major Marketers was over a N256 billion subsidy claim yet to be paid by the Government. The fuel scarcity saga is a recurring script without an end. The Government accuses the marketers of greed and ‘unpatrotism’ and the marketers simply reply ‘kilon je patriotism?’. During these back and forth negotiations, some funny things can happen. In this ‘Fast and Furious-isque’ incident last year, the Minister of Petroleum accused the marketers of changing truck numbers to avoid tracking.

As you hustle to buy black market fuel, this game of ‘he-said-she-said’ continues till the Government eventually gives in. Most times, the government is held hostage, as Nigerians don’t particularly care how the oil comes, we just want it…meanwhile, the marketers are fine with waiting it out. This process of waiting it out leads to fuel scarcity.

 

“So, why are you making Nigerians suffer? Why all these long queues? It has become a situation where we have a cartel that can grind the nation to a halt at will. When they want something, they close all the stations and refuse to sell. When they see that they have got their way, they open the stations again. Is that not what is happening today? We have been laboring under this for a long time, trying to deal with it, trying to manage a group strong enough to hold the nation to ransom.”

Dr Ngozi Okonjo Iweala

 

 

How Does This Affect Me?

A rhetorical question, as you must of course know how fuel scarcity affects you in terms of loss of productivity, time, money, happiness and basically anything good. Some motorists spend an average of 12 hours in the blazing sun queuing for fuel at an inflated price. Subsequently, the increased cost gets passed on to other goods and services ranging from your mechanic to your fish seller to your tailor to your barber.  And in Nigeria, it doesn’t matter if your business relies on fuel or not, fuel scarcity is a superb reason to increase your price.

To be fair, it shouldn’t affect most goods and services, but it does. Why? Because you live in a special country that will punish you with fuel scarcity as well as power scarcity. Thanks to erratic or non-existent power supply, a large number of small and medium enterprises run on generators…which require fuel. So a sustained scarcity of fuel will predictably eat into their profit margin. In some cases, even when the fuel scarcity is over, prices still remain high – I explain the reason for that in my next post.

Did I forget that the generator at home runs on fuel and that you’re also screwed when there’s fuel scarcity? No. I decided to ignore it lest I remember how I slept through the heat and mosquitoes last weekend.

Ehen, So Why Does Fuel Scarcity Also Affect The Price Of Foodstuff?

For food to get to your market, it has to be transported. Nigeria relies heavily on roads for transportation of foodstuff from one state to the next. Reliance on roads means reliance on vehicles…vehicles that run on fuel. So when fuel prices rise, you can bet it affects the cost of transporting foodstuff. It’s why we desperately need to get our railway system back on track (pun shamelessly intended).

On the issue of Railway, we didn’t hear word this election period. What’s the big deal?

Within a country like Nigeria, the railway is perhaps the most effective way to transport products from one place to another. They run on their own tracks and don’t have to get stuck in Apapa ‘traffic’. Moreover, compared to a truck, a train is able to carry a whole lot more stuff. Also, trains don’t have to rely on petrol, so they’re immune from the occasional silly game of fuel scarcity. Hopefully, we see an expansion of the ‘trainsformation agenda’ in the incoming administration.

The Nigerian government has to see the unsustainability of this back and forth with the petroleum marketers, so what can they do about this?

Solutions have been proffered and…proffered, but alas, you should know the drill by now. Just because we know how to theoretically fix things does not mean we have the willingness or ability to fix them. These solutions range from removing subsidy, to restoring our refineries, to scraping NNPC, to passing the Petroleum Industry Bill (PIB), to getting rid of greedy cabals, to better regulations, to deregulation…to let’s stop here.

My final point is this: too much middlemen and processes complicate things. Start by reducing these cabals processes and smoothing out the information asymmetry that exists within the market…or we can keep begging the marketers to be patriotic. The solutions are abundant and this post has gotten too long…and I frankly do not plan on punishing you all with a thesis. Anyways, in case another fuel scarcity starts, send this to a friend sitting in a queue at a fuel station, they might as well know why they’re suffering.

  • Ibk

    Unpatriotism? I laugh in spanish..

    We’ve all been dancing to the tunes of the cabals since God knows when and except the incoming government does something about them, we’ll continue to. I just dont understand how a handful of men can hold a whole nation by the balls time and time again and nothing has been done about it. So much power in the hands of so few men.

    • kanyin

      And you think they are only men because you think women are not powerful enough to be part of the cabals?! i’m not a feminist o… i’m just saying. Lol

      Anyway… I think it is highly preposterous /ludicrous for a group of men “and women” to hold the nation hostage because our very corrupt leaders can’t put proper checks in place and remove the redundant process it takes to get fuel to the general public.

      • Anonymous

        I like this simple analysis of a very complex situation in the oil and gas sector. Thank you. But I honestly think that the key is in the hands of the people……..when we have had enough…..the opacity will disappear.

  • Tola Odejayi

    Ah, there you are, Chuba. Good to see naijanomics.me has found a new home.

    I think that this article was missing something. What I would have liked to hear (under the ‘The Cost of Getting from A-Z’ section) was a detailed description of the process whereby fuel used by consumers gets from the oil wells (here or abroad) to the consumers’ tanks/stoves, as well as who is involved along the way and how much money they make.

    • True that! Subconsciously left it out to reduce post length. I’ll update it though. Cheers!