On ending the fuel importation regime


WHEN Industry, Trade and Investment minister, Olusegun Aganga, disclosed the Goodluck Jonathan administration’s plan towards ending the country’s depressing regime of fuel importation in 2018 and highlighted its conscious efforts at making more of non-oil exports to boost revenue, the excitement that followed was not surprising. But if past initiatives and especially the conflicting policy signals from this government are anything to go by, disappointment may be an end-result. And Nigeria does not deserve that. Undoubtedly, the plan is the most desirable option for a country, which wastes too much money importing what it can produce. But corruption and lack of political will have prevented the nation’s leaders from doing the right thing.

   The high dependence on fuel importation, linked to a low domestic refining capacity, has been the tragedy of Nigeria’s oil sector. If only the government would get more serious with the reform processes, including ending importation of fuel products!

   Based on the industrial revolution launched in 2012, by the Goodluck Jonathan administration, Aganga said: “There are many sectors we should have developed over the years, but for decades, we relied entirely on exporting raw materials. That era has gone.” Part of the good news from the minister is that stopping the importation would save the country a minimum of $10 billion, having spent about “three billion dollars importing steel, about six billion dollars importing cars and spare parts, about $1.7 billion on sugar.” According to him, 13 other products that would replace oil and in which Nigeria has comparative advantage as well as export capacity in agro-industrial, mining related and industrial products have also been identified. This sounds good.

   Contrary to Aganga’s hope, however, only a few months ago, Petroleum Minister Diezani Alison-Madueke who has been in charge of the country’s oil and gas assets for the past four years had, in an address practically dismissed hopes of ending fuel importation by some African countries, including Angola, Uganda, Mozambique and Nigeria in the next 20 years. 

   Considering her powerful position in the industry, Alison-Madueke is adequately informed about developments in the industry. So, the question is: who do Nigerians believe between Alison-Madueke and Aganga? What informed the oil minister’s claim of an irredeemable situation for another 20 years before the importation regime becomes history? And what informs Aganga’s optimism?

   The existing, under-performing four refineries, no doubt, are part of the general malaise. That the bulk of Nigeria’s crude oil is refined abroad is a pointer to the high level of inefficiency in the industry. The four refineries including the old Port Harcourt Refinery (1965), the Warri Refinery (1978), the Kaduna Refinery (1980) and the new Port Harcourt Refinery (1987) are all functioning at sub-optimal capacity, thanks to official ineptitude and a regime in which maintenance culture is almost zero.

   The result: Nigeria continues to spend substantial foreign exchange to import fuel – at international price per metric tonne plus other landing costs – for domestic consumption. Quoted NNPC figures claim the four refineries had, up to 2011, a combined installed capacity of 445,000 bpd but ran on less than 30% of installed capacity. Also, for almost the whole of 2010, the four complexes could only refine a mere 80,757 metric tonnes of petroleum products (19,967 of premium motor spirit, PMS or petrol; 53,223.4 MT of automotive gas oil, AGO or diesel; and 7,567MT of liquefied petroleum gas, LPG or cooking gas. The rest volume of 8.1 million MT of petroleum products in the downstream sector was imported. The situation, it is being reported, is even worse now.

   Worse still, the country is faced with a process of importation that promotes corruption. Figures of imported products are allegedly inflated to facilitate high subsidy claims, at huge costs to Nigerian tax-payers. Interestingly, the insignificant quantity of crude refined locally (in relation to imports) is supplied to end users at same price with imported products. A regime of continued importation of refined fuel from all manner of sources to satisfy local consumption in a country that has everything going for it (to satisfy the domestic market and even export) is, of course, appalling and unacceptable. The government must therefore set as priority a commitment to ending the industry sleaze as soon as possible.

   Why have the international oil companies that have shipped the crude from Nigeria for almost six decades not found it worthy to run functional refineries locally as they do elsewhere? Collaboration with foreign interests or countries with the capacity should also have set the pace for the establishment of refineries across the country in build-operate contextual agreements. Such conscious efforts would have seen Nigeria not only satisfying local consumption but also exporting to countries on the West Coast for example.

  Nigeria has certainly had enough of net-importer status. A change in policy direction with a view to getting one or two of the four refineries to produce at optimal level, would be a starting point. 

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1 Comment
  • New Nigerian

    The question really is not ending fuel importation per se. The issue is at what cost to Nigerians do we import fuel? It reminds me of the proverbial kid and candy whereby he spends all the money he has – $1000 – on candy. Some “smart” people have robbed Nigerians blind based on the ruse of importing fuel. What is needed is a holistic approach of handling the issue from a supply chain standpoint – production through to the pump – and having a regime of benefit to the common man.

    Killing corruption before it kills Nigeria starts from killing the cabal of risk-less business managers a.k.a rent seekers or PPMA and DOPMA. As HRH SLS said when he was governor of central bank, any idiot can make money in this risk-less business. It is plain wrong from national security standpoint to hand over into the hands of a few private hands the monopoly to import PMS while at the same time paying them for all their costs, including fake demurrage, and guaranteeing them a profit margin, even as they inflate through fowl means what they import and divert some to neighboring countries to sell at the market rate there. It is wrong because the program is a government program outsourced to cronies. We the people demand that this scam should not only be stopped immediately, a forensic analysis should be done to determine the refund of whatever need to be paid back into the treasury of the federal republic (It is plain evil that we have been borrowing money to give to these rent seekers, even, as we can’t pay salaries, build infrastructures and pave the roads for the vehicles) – this should be done in concert with the speedy re-organization of the armed forces, so we are sure they do not pay some idiot to shoot their way to power. May God help Nigerians as we all do the needful to work with the new administration to rid ourselves of parasites so we would have the strength to actualize the promise of democracy and rule of law for all Nigerians.

    The solution is to bring back what worked before when GMB was in charge of the Petroleum Ministry and also when he was head of state – make an open & competitive bid to conglomerates for the operations of the refineries + crude oil arrangement to refine (offshore) and bring back PMS to Nigeria – while at the same time developing the local capability, throttling down the amount brought as local sourcing is improved. Because of guaranteed market, we should be able to get a very good price – using the negotiation approach of walmart (an American wholesaler that guarantees every day low price and because of volume could exact very low price from manufacturers worldwide). With known cost from the well head to the pump, we should be able to put a modest tax on it (revenue for transportation trust fund – similar to the petroleum trust fund of former years – every western democracy has such provisions) and still do very well for the people. The current situation where individuals claim to borrow Nigeria money with interest to import the fuel, are paid for their service of importing the fuel (with all the corruption it entails), then given the monopoly to exact tax from the people on the same fuel by gaming distribution of it is not only wrong, it is impunity on steroids.

    Overall Goal of handing PMS in Nigeria should be to make Nigeria net exporter of PMS in 4 years. This is a national security issue that should be pursued with utmost urgency, similar with the urgency of revamping our power grid (+ increasing the generation capacity), another national security issue. So help us God.