Ending Fuel Scarcity

For over three weeks now, Nigerians have had to grapple with another episode of fuel scarcity which has become a perennial problem for the country. Major Oil Marketers Association of Nigeria (MOMAN) have been on strike to protest nonpayment of an outstanding subsidy claim of about N200 billion by the Federal Government. The situation has once again brought about the need to find a lasting solution to fuel scarcity which leaves the citizenry in untold hardship.

Regrettably, fuel scarcity is almost becoming a common phrase in our socio-economic lexicon such that it has become an endemic phenomenon. It is, indeed, a paradox that Nigeria produces crude oil and yet cannot adequately meet up with its local consumption of petroleum products considering that our four refineries are producing below capacity. For this reason, the country has to depend on the importation of the short fall to adequately service its local consumption even as government determines the price and pays questionable subsidy to make the product affordable for citizens.

There has been several stories about the root cause of this particular scarcity which is gradually grounding businesses. While the outgoing government claims it has paid major part of its indebtedness to major marketers, the marketers have denied the claims. Investigations has however revealed that the actual amount outstanding to be paid to MOMAN is only about N40 billion. But due to delays in payments as well as exchange rate differentials, the consolidated subsidy payments have become bloated.

When government delays in the settlement of the subsidy payments, the differentials due to high exchange rate and the depreciation of the Naira add up to high outstanding consolidated subsidy payments. The hard truth is that if this situation is allowed to subsist, consolidated subsidy payments will always exceed expectations and budgetary provisions, particularly if the Naira exchange rate also continues to fall.  This cannot lead to any meaningful and sustainable economic development.

We, therefore, believe that this country will continue to grapple with the issue of fuel scarcity and subsidy payments if the Central Bank of Nigeria (CBN) does not strengthen the Naira. To this end, it is imperative that the apex bank puts measures in place to ensure that the Naira appreciates or does not suffer further devaluation considering that it will engender rising prices of fuel which will make subsidy removal a major challenge. Certainly, a stronger Naira would attract a host of investors into private domestic refining as fuel prices will progressively and steadily fall even below subsidized price.

Beyond this, we also expect government to completely deregulate the oil market. But it is important that the Petroleum Industry Bill (PIB) which has been lying idle in the National Assembly for years be passed considering its provisions that are aimed at bringing about a more robust oil industry.