Guardian / Nigeria: Chief Martin Onovo, a Seasoned Petroleum Engineer and National President, Strategic Union of Professionals for the Advancement of Nigeria (SUPA) spoke on why Nigerian economy has never benefitted from fuel price hike, the dire consequences of incessant fuel price hike by successive governments and other topical issues in the oil industry.
Is it true that the current fuel on sale now that is white in colour is a mixture of petrochemicals that is not good for vehicle engine?
Fuel is a multi-component fluid. The fuel on sale in Nigeria is imported by different petroleum product importers from different sources. Therefore, we cannot generalize that fuel on sale now in Nigeria is not good for engine use. If any particular product sample is identified, it can be traced to the importer for investigation and corrective actions.
The quality of fuel imported into Nigeria is regulated by the Federal Government and the international shipping practices. To determine the specific components and quantities of any fuel sample, a quality test (compositional analysis) can be conducted.
The Nigerian government through the Nigeria National Petroleum Corporation (NNPC) and the Department of Petroleum Resources (DPR) has a specification for the quality of fuel that can be imported into the country.
Ocean-going tankers carrying these products by international best practices have quantity and quality certificates. The quality certificates have the quality specification of the product being transported. When the vessels arrive at their ports of discharge in Nigeria, the industry practice is to inspect the products using accredited inspection agencies to confirm the quality of the products before they are received. If all the Nigerian regulatory agencies conduct their activities effectively, there will be no off-spec fuel products on sale. Therefore, we must hold the Federal Government and its regulatory authorities accountable for any deviations.
Why has colourless fuel been on sale since the government introduced price modulation policy on the product?
The government did not introduce a price modulation policy. The Federal Government introduced an outrageous profiteering policy for the NNPC and other private petroleum products companies in the Nigerian downstream sector. The illegitimate extortionist profits across the importation, distribution and retailing segments of the downstream sector amounted to about N44.05/litre (44% profit) as confirmed by the NNPC public statement. Off-spec fuel can only be sold in Nigeria if the federal government regulatory agencies fail in its responsibilities.
Is it true that importers and marketers of the product are engaging in sharp practices to the detriment of the consumers?
It may be unfair to generalise against all importers and marketers since they act independently. Sharp practices must be reported and be investigated by the regulatory agencies so that corrective actions can be taken appropriately.
Why are Petroleum Products Pricing Regulatory Agency (PPPRA) and DPR not effectively regulating the activities of the importers and marketers of the products?
PPPRA monitors and regulates the supply, distribution and prices of petroleum products. Our laws require a Governing Board’ for the PPPRA. Until it is properly re-constituted as required by the law, its capacity gaps may not be closed. The DPR is the principal regulator of both the upstream and downstream sectors of the oil and gas industry in Nigeria.
The roles of the DPR include, issuing import permits for petroleum products importation, confirming that imported products meet our Nigerian specifications and clearance for imported products. We must presume that the DPR is performing its regulatory roles until we establish concretely that it is not.
What is your view on government’s alleged plan to fully deregulate the fuel price?
We choose not to respond to speculations as that may not be very productive. The increase of the price of fuel from N86.50 to N145 on May 11, was another giant step backward for the Nigerian economy and for Nigerians.
Successive governments since after the Gen. Sani Abacha government have not understood the folly of increasing the price of fuel and the dire consequences of the same.
With the efforts of the late Chief Gani Fawehinmi, (SAN) over several years on this issue of pricing petroleum products, any competent government should have understood that increasing the price of petroleum products subverts the Nigerian economy in several ways and undermines national development.
The history of the price of PMS in Nigeria represents a shocking testimony to the biblical position that, ‘My people perish for lack of knowledge. Since, the then military administration increased the price of PMS from 8k to 15k in 1978, almost all successive governments also increased prices further. With all these increments, the Nigerian economy has not benefitted from the increase in the price of fuel. On the contrary, these increases have each time resulted to inflation, industrial crisis, unemployment, higher crime rates, declining economic productivity and poverty.
The basic dysfunctionality in the supply of petroleum products to Nigerian consumers is the apparent preference of importation of products to domestic refining. While we must import if we do not have domestic supply, a patriotic and effective government could have restored existing domestic refining capacity, upgraded the refineries, and built new refineries to increase domestic refining capacity. Some of the ways importation and the associated price increases subvert the economy include increased cost of petroleum products due to wastefulness and inefficiency, cost of domestic supply is much less than cost of importation.
Undermining the utility of national assets and investments in refineries, abandoning colossal national investments in the four existing refineries, increase in unemployment from domestic refining, product and by-product, off-takers, and support services by the decline in local refining and support activities, subversion of our national Gross Domestic Product (GDP) by very low domestic productivity in the strategic refining sector and hyperinflation in the economy.
The Federal Government Monetary Policy Committee has previously confirmed this few years ago. Prices of petroleum products, energy, transportation, materials, manufacturing, food, and others have increased sharply.
The long history of increases in the price of PMS from 8 kobo in 1966 to 15 kobo in 1978, 20 kobo in 1982, 70 kobo in 1991, N5 in 1993, N11 in 1994, N20 in 1999, N70 in 2007, N87 in 2015, to N145 now, confirms that the Nigerian economy has never benefitted from any increase in the price of fuel. Fuel price increases have been implemented about twenty times since 1978.
It must be clearly indicated that with domestic refining, the current cost of fuel will be less than N68/l (at N300/$ exchange rate). The price of fuel in Venezuela (another OPEC member country) was 12 cents per gallon (about N9/l at N300/$ exchange rate), until this year when it was increased to 38 cents per gallon (about N29/l).
Imported fuel has unnecessary additional costs like international crude oil sale price and refinery profit margins, transportation costs of products from source country to Nigeria, lightering costs, port charges, taxes and export duties at source country, insurance costs for transportation, brokerage costs for agents, etc. These unnecessary additional costs contribute to the very high cost of imported petroleum products in Nigeria.
The facts are Nigeria is a major exporter of crude oil and a member of OPEC. Nigeria has four existing refineries with a total installed capacity of 445,000 bpd, existing total refining capacity in Nigeria is sufficient for domestic use, improving domestic refining will increase real GDP and improve employment.
The All Progressives Congress (APC) had questioned the N97 fuel price in 2014 against the falling price of crude oil. The same APC-led government has now increased price of the product against the falling crude oil price. What a paradox! International price of crude oil varies daily.
Considering the indicated facts, it becomes obvious that the rulers of Nigeria have not only continued to mismanage the downstream oil sector of the economy, but have also mismanaged the entire Nigerian economy, leading to a very high unemployment rate, mass poverty, waste, corruption, rising national debt and a looming debt crisis.
Nigeria must depart from this path of economic ruination. Unfortunately, the present government has consistently taken serial actions to distort the downstream sector and also destroy the Nigerian economy completely.
