Get NNPC out of oil downstream

AFTER weeks of sheer torment from another round of excruciating petrol scarcity, Nigerians are searching for answers to their perennial socioeconomic predicaments. From pockets of scarcity in the Federal Capital Territory and the surrounding states, petrol queues engulfed the whole country about two weeks ago. Subsequently, prices spiralled out of control, deepening the cost-of-living crisis. The Mele Kyari-led NNPC has failed Nigerians again.

The scarcity is unnerving. Long queues are the order of the day at the few petrol filling stations dispensing the product. At independent stations, prices shot to N1,300 per litre last weekend from N650. The black market price has jumped to N2,000\l. Many are sleeping at stations. Others celebrated May Day in queues. A According report said a lawless security agent shot dead a young man in a rowdy queue for petrol in Lagos on Wednesday night.

This is a bitter moment, which Nigerians repeatedly experience though their country is Africa’s largest oil producer.

The official explanation that the removal of petrol subsidy will ensure the wide availability of petrol has fallen flat. So, it is simplistic to argue this way. President Bola Tinubu cancelled petrol subsidies on Inauguration Day, a trigger for petrol prices to move from N187/l to between N568/l and N650/l, but scarcity is still cyclical.

It is a complex matter. First, Nigeria relies wholly on petrol imports. This is a national folly, perpetrated by the Federal Government and the NNPC.

For decades, the four public refineries under NNPC control have been comatose. Combined, they have a nameplate of 445,000 barrels per day. No President has called the NNPC to account for mismanaging them. Elsewhere, heads would have rolled, and the right thing done. The past Presidents – except Jonathan – are all complicit in retaining the Minister of Petroleum portfolio.

This comes at a great cost to the public purse and Nigeria’s reputation as a failing state. In 2022, Nigeria incurred an import bill of N5.2 trillion on petrol. This is unwise when the country is a net producer of crude oil, and the economy is illiquid. This is in addition to subsidy payments. The Goodluck Jonathan administration paid N2.57 trillion on phantom petrol subsidies in 2011.

The first and second intertwine. Although oil theft reduced from 700,000bpd under Muhammadu Buhari (2015-2019), Nuhu Ribadu, Tinubu’s National Security Adviser, says it is still 400,000bpd, by far the highest globally. So, Nigeria cannot meet its OPEC quota of 1.7 million bpd. It loses more than $4 million in income daily. Worse, it cannot meet the crude demand of the up-and-coming domestic refineries. Combined with the insecurity in the Niger Delta, the international investors have fled.

To meet demand, the NNPC has become the sole importer of petroleum products. The monopoly is so bad that even the oil majors have tactically withdrawn. This not only leaves Nigerians at the mercy of the NNPC, but it also exposes Nigeria’s disarticulation and pretensions to a free market economy.

A major disincentive is that the NNPC is both a regulator and a retailer. Nigeria cannot have its cake and eat it.

Therefore, Tinubu should remove the NNPC from the downstream sector. By allowing competition to thrive, Nigeria will derive several benefits, including the return of international and domestic investors to the sector, innovation, jobs, taxes, and a higher GDP.

The President should learn from the United States. That country, the world’s largest crude producer, consumes about 8.9mbpd but the government owns none of the refineries. Saudi Aramco, Marathon Petroleum Corp and ExxonMobil operate the largest refineries there.

Therefore, Tinubu should swiftly privatise the refineries and remove the imprints of the NNPC from retailing. This is the only way out of the perennial national shame of petrol scarcity.