NNPC’s alarming $5.8bn petrol import bill

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Without batting an eyelid, Maikanti Baru, the Group Managing Director of the Nigerian National Petroleum Corporation, told a bewildered nation last week that he had spent $5.8 billion importing petrol in just two months. This figure is likely to rise sharply since he says the NNPC’s petrol supply will rise from 55 million litres per day to 100 million lpd.  No sane country carries on wasting so much of its resources on importing a product it can so easily produce for local consumption and for export.

But this is a misadventure long foretold: this newspaper has for years highlighted the folly of relying on imports for refined petroleum products, while the 2018 national budget is anchored on a daily crude oil production of 2.3 million barrels. Stubbornly, against all economic reasoning, the government holds on to its four loss-making refineries, instead of selling them to competent private operators. Highest capacity usage was 42.4 per cent throughout 2017, according to the NNPC figures, with zero capacity recorded for some months at some refineries.

Why is the government not alarmed that so much is being spent on petrol imports alone? Repeated visits to brief committees of the two chambers of the National Assembly by NNPC executives have, curiously, also failed to arouse the expected urgency to reform the distorted petroleum downstream sector and save the country the billions spent daily on imports and subsidy. Not even a revelation that N24 billion is incurred monthly and N744 million daily as subsidy has moved them.

The Central Bank of Nigeria figures indicate that foreign reserves rose to $43.2 billion on March 6, the highest level since mid-2014. Significantly, the CBN just announced a drop in average national import bill to $1.9 billion monthly in the second half of 2017, down from $5.5 billion previously, following measures to curb certain types of imports.

While the House of Representatives in 2012 swiftly investigated the expenditure of N2.53 trillion on subsidy payments in the 2011 fiscal year, it is lukewarm about the $5.8 billion (and rising) spent in just two months that, at an official exchange rate of N305 to US$1, comes to N1.76 trillion, about the same amount that was identified by the Reps ad hoc committee as fraudulent, unbudgeted subsidy payments in 2011. It also represents about 20 per cent of the 2018 budget of N8.6 trillion.

Ibe Kachikwu, the Minister of State for Petroleum Resources, says Nigeria spends about $28 billion each year importing petroleum products. According to the National Bureau of Statistics, total value of exports from Nigeria in the second quarter of 2017 was N3.1 trillion, while spending an annual average of N3.35 trillion importing petrol. The NBS put the value of petrol imports in 2016 at N2.39 trillion. Worse, according to Kachikwu, 40 per cent of this is spent on “logistics.” We cannot afford this continued waste and crippling import dependence for everything, including goods in which we have comparative advantage. Already, the country spends $22 billion each year importing food, says Heineken Lokpobiri, the Minister of State for Agriculture and Rural Development, though it has adequate arable land and a rich diversity of cash and food crops.

President Muhammadu Buhari’s leisurely response to this fiscal haemorrhage is unhelpful; the bounce in the external reserves stock is attributable to higher crude oil prices. Our external debt stock on the other hand had risen to $15.35 billion by the end of September 2017 and is still rising fast as the government borrows furiously to fund capital projects and the budget deficit.

It is imperative to check the claims from the NNPC and the Petroleum Ministry: while Baru puts current demand at 60 million lpd, up from the 55 million litres he cited last month, Kachikwu claims a daily demand of 66 million lpd. But while other marketers were involved in importing petrol, 35 million lpd was supplied and largely met local demand and a thriving smuggling market to neighbouring countries. Convinced that widespread smuggling is responsible for persistent shortages, the NNPC visited the Nigeria Customs Service and submitted details of retail outlets close to the country’s borders to its Comptroller-General, Hameed Ali. Given the severity of the problem, Ali and other security agencies’ heads require presidential orders to move decisively to stop the smuggling trade.

Independent investigations should be undertaken urgently by the Presidency and the National Assembly into the petrol import system. Who verifies NNPC’s claims? The Reps probe in 2012 uncovered bogus claims by importers and opaque dealings by the NNPC. Today, despite higher import claims, many retail outlets have no stocks when there should be enough to use and more than enough to smuggle! According to the US Energy Information Administration, petroleum consumption in the neighbouring countries where our petrol is believed to have been smuggled to is: Chad 11.2 litres per capita or 2,200 barrels per day; Togo 13,000 bpd or 102.6 litres per capita; Niger Republic 14,000 bpd or 46.5 litres per capita; Benin Republic 41,000 bpd or 234.2 per capita; and Ghana 83,000 or 157 litres per capita. These markets combined cannot absorb the volume of petrol “missing” daily from Nigeria.

Top priority should be getting other marketers back to break the NNPC’s import monopoly. The news that landing cost per litre has dropped from N170 per litre to N161 per litre is enough to galvanise government to entice marketers back through transparent, competitive bidding. The NNPC should not be allowed to continue spending as it deems fit without strict oversight. Its plan to raise and spend another $1.8 billion for turnaround maintenance of its four dysfunctional refineries is surely precious money going down the drain, the latest in decades-long endless cycle of waste and graft that has never achieved the advertised target of full capacity utilisation or subjected to any acceptable standard of accountability. 

Buhari should transparently privatise them, liberalise the environment to draw in private foreign capital and expertise and reform the NNPC as he promised, while seeking the Presidency. Punch Editorial

 

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