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| Dr. Ahmed Adamu |
By Dr. Ahmed Adamu
Today is the one year anniversary of the historic democratic
revolution in Nigeria, when Nigerians cast their votes to install a new
government headed by the new amalgamated political party. This was a remarkable
turning point in the history of the country. Within a year of this development,
people have so far seen changes in some aspects of their socio-economic lives. Even
though, the challenges are enormous, the speed of the positive change may not catch
up with the expectations immediately. One area that has been of serious concern
to Nigerians is the petroleum sector, especially with the recent scarcity of
the petrol. This has affected the lives
and wellbeing of the people, as the price of the blood of the world i.e Petrol
is up to 117% higher than its regulated price.
The money that people would have used to buy food or to buy
medicine or to pay for the bills, they now use it to pay for petrol, thereby
denying them access to basic needs of life. People may become poorer as they
could not provide for most of their needs, as their savings now go toward
paying for the petrol. This most surely worry the government, and will require
short term, medium and long term measures for it to be addressed. The government
will always have to do better to maintain the trust and loyalty of the people,
and people have to be patient and play their own roles, as change never comes easy.
Nigerians actually expect Magic from the ruling party (APC),
and it appears it needs more than the magic to handle the complex issues facing
Nigeria. And this is why the junior minister for Petroleum said the truth that
he cannot perform magic in fixing the shortages of petrol, and that Nigerians
shall be grateful for the little they have and endure the hardship. This
confession made the leader of the ruling party (Senator Bola Tinubu) to blast the
junior minister for Petroleum (Mr Kachiku) for his comment, and stressing that more can be done with much
better optimism and better performance, which I could not agree more.
The current shortages of petrol and its erratic price is
partly contributed by exploitation of the suppliers, who would rather maximise
their profit at the expense of the poor. The government always has its
limitation, and the citizens have their own leadership roles. Most of the
hardship we go through are largely due to lack of sincerity, selflessness and
patriotism from the citizens. Most of the major marketers now import petrol and
sell at a price of their choice to maximise profit, and this profit maximization
motives is transferred down to the retailers. People would have to accept any
price, as Petrol has inelastic demand and it is a necessary commodity. Even
though, some of the local marketers cannot access sufficient hard currency in
the money market, and they still have to pay more Naira to acquire single unit
of foreign currency, and this reduces their capacity to import. Nevertheless,
if the marketers adhere to the regulated margins, the price of petrol won’t
have reach this level high.
There is apparent disregard to regulation in the Petroleum
Sector. If the Price of Petrol is pegged at N86.5 per litre, why is it sold at
N188 per litre? Initially, the price was regulated at N97 per litre, but due to
the drop in the crude oil price, the landing cost of the litre of petrol also reduced,
which motivated the downward review of the price to N86.5. This was to allow
the major marketers to make marginal profit. And since the price of crude oil
has increased, there is need for the upward review of the regulated price,
since there is no funding for subsidy. This will discourage the suppliers from
unnecessary exploitations in the name of cost recovery. Therefore, there must
be strict adherence to the adjustable and viable price of petrol across the
country, and the regulated price shall be benchmarked with the most expensive
crude oil market price.
As at last ten days, the landing cost of petrol per litre was
N71.49, and the retailer’s margins was just N5/litre, and that of a dealer is
just N1.95/litre. Now, one wonders what is the landing cost of the litre that
was sold at N188? This shows apparent exploitations and profit maximization.
Fixing and building new refineries have been the critical propositions
for fixing the lingering petroleum crisis in the country. Nigeria has the 10th
largest oil reserves in the world and is the 13th largest producer, yet it
faces shortages of petroleum products. The investment cost of a refinery that
can produce what Nigeria demands of petrol daily is estimated at around N800
billion. If this is too much for government to build, it can then consider a
joint venture with the private sector, and by 2019, it will start producing
sufficient petrol without the need to import any.
Providing sufficient and affordable petroleum products is
the second highest point a politician can score after electricity. There is
relative improvement in the electricity supply, the next big call is to ensure
adequate supply of petrol and adherence to regulation. Mr Kachiku estimated
that Nigerians will continue to suffer for the next two months, which I pray
that should not happen, because, as a short term measure, we can use the
recovered looted funds to adequately supply the petrol at the interim. The
major marketers can even be incentivised to enhance their supply capacity.
The NNPC may not have sufficient storage and distribution
capacity to meet the country’s demand, as such, the marketers must be encouraged
to be selfless and patriotic and adhere to the maximum regulated profit margin.
They should not quantify their profit based on the money that go into their
pockets, but how many lives they put at ease, how many businesses they put
back, how many lives they saves, and how fast they make the economy grow. There is need for emergency meeting with all
the major and independent marketers to address the crisis within a week. There should be radical investment in the
construction of new refineries immediately, in order to make Nigeria 100% fuel
sufficient devoid of the costly importation.
In terms of leadership of the petroleum sector, we know how
honest and active Mr President is, and he has the necessary experience in the
sector, however, I would strongly advice Mr President to strip himself of the
petroleum ministership and appoint a substantive Minister for Petroleum, who
will dedicate 100% of his/her attention and commitment to the complex sector.
The petroleum sector would require robust attention more than any other sector.
We know Mr President is already faced with many daunting tasks. Mr President
has been travelling outside the country in order to mend the image of the
country and cement new bilateral relationship that would prosper the country, and
this has been distractive one way or the other. He is also very busy trying to
stabilise the security and economy of the country. As such, he may not has to
be so burdened with another challenge that he could easily assign it to someone
else.
Mr. Kachiku (the junior minister for Petroleum) who doubled
as the Managing Director (MD) of the Complex Nigerian National Petroleum
Corporation (NNPC) and who handles most of the Petroleum Ministry leadership
roles is already overwhelmed with so many pressing issues in the Petroleum
Sector. To make things easy for managing the Petroleum Sector, Nigeria needs a
separate MD of NNPC, separate Ministers (Junior and Senior) for Petroleum. Mr.
Kachiku should retain his earlier portfolio as MD of NNPC only, and some young competent
Nigerians who are very familiar with the current global and local petroleum
sector shall be appointed as Ministers for Petroleum.
Dr. Ahmed
Adamu,
Petroleum
Economist and Development Expert,
Pioneer
Global Chairperson, Commonwealth Youth Council,
University Lecturer (Economics), Umaru Musa
Yar’adua University, Katsina,
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