Nigeria could plunge into a fuel crisis soon

Yes we all look forward to the weekend presidential elections in Nigeria and our hopes stand in it's achievable credibility (yes, it's possible). Most times the common man on the street is the least involved and most affected as per effects by governmental policies but hopefully that will change soon. 

One major populace dependent commodity is petrol. We need it in our cars, bikes, generators, etc. It moves a large part of the small-medium scale enterprises and in a country such as Nigeria it can bring productivity to a stand still if not readily available.

What I'm about to share is a perspective to a possible (serious) fuel crisis in Nigeria come the second quarter of this year.

Word in the lines through the Petroleum Products Pricing and Regulatory Agency (PPPRA) informed us that the government plans to cut second quarter fuel imports by 50%. Proposed import for quarter one stood at 3 million litres and will see it drop to 1.5 million litres in the second quarter the agency said. Also, the quarter transition will see the number of import permits slump to 36 from 42.

Before you make a wild guess as to why there are some "valid" reasons I researched about. Firstly, the marketers issued a request to the PPPRA and DPR to lower their quotas a while back. As much as this sounds insane (why supply less in a high demand market?) they have a serious problem with the structured financial facilities they need for this kind of supply. We all have been following the news and know that our foreign exchange is scratching dirt and the interest rates have been going up as well. With the banks all being reluctant to finance due to the distrust in governments ability to repay as when due, the only logical thing to do as a marketer is reduce the burden you have to bear. All this is still intertwined with the subsidy payment deficit which the government keeps empty promises on.

Hearing a news as this, one will want to look inward, yes at our local refineries which by the way are functioning at nearly absent capacity. I learnt that they are currently undergoing repair and maintenance operations which kicked off last year. Pardon me for not being so optimistic about a turn around maintenance (TAM) for our refineries as we all know how many times that has happened. But the plan is to make up for the deficit 1.5 million litres accrued by import slash with the capacity which will be produced from our refineries.

The key thing is this, if the TAM fails or is delayed for unforeseen reasons the government might have to stoop into their reserves which by the way can only sustain the country for 30days. If that fails to suffice then the country might be facing a serious fuel crisis. The way the crude market is going globally, with strong crude economies facing a painful crunch on revenues, a fuel crisis situation will be a tough for the Nigerian government to handle anytime soon. (By the way the current and previously experienced (2nd week in February) scarcities can't be considered a fuel crisis. It's all due to uncertainty that comes with elections in this country).

The TAM operations kicked off around October last year and is expected to last 18 months with progress measured by a gradual increase in capacity for the refineries. The expectation is that by the end of this repair and maintenance project the capacity of the 3 refineries combined would have gone up to 90%. This is approximately by April 2016. Mr. Ian Udoh, Group Executive Director, Refining and Petrochemicals, NNPC, stated that “The frequency of shutting down to repair is rather high, but we expect that to gradually diminish until we have 90 per cent capacity by early next year, given the 18 months schedule that we have set.”