December 22, 2017| Fuel scarcity worsened on the last working day to Xmas due to a viscous combination of thin margins, supply chain issues and hoarding, sources inform Nairametrics.
As Nigerians scramble to finish up last-minute shopping activities ahead of Xmas, they have been faced with fuel shortages, spending hours in long fuel queues in filling stations across large cities like Lagos, Abuja and Porthacourt.
The situation appeared to have gotten worse in Thursday and Friday, just as the NNPC announced fuel will be available over the weekend. However, the debilitating factors that triggered the fuel scarcity persist. Here are the main ones
Thin Margins
Sources in the Department for Petroleum Resources indicate that thin margins have been one of the reasons why the fuel situation has worsened. They explained that PPMC, the petroleum marketing arm of the NNPC is only allowed to keep a margin of N6 from its sale of petroleum products.
The low margin is further reduced to about N2 by the time it gets to depot owners, who in turn squeeze out the remaining margins available for filling stations operators. This has led to increased cases of diversion and hoarding as operators try to sell above the official pump price of N145 to help them eke out some margins.
Some stations also allegedly adjust their pump illegally by giving customers the impression that petrol is being sold at official price but manipulating the meter such that the consumers actually spend more at the same price.
The PPMC is also operating at a year to date loss of about N90 billion and makes up about 40% of NNPC loss divisions combined loss of about N235 billion as at September 2017
Limited supply to Depots
We also understand one of the major reasons for the fuel scarcity was PPMC decision to only sell fuel to two of its main storage facilities (depots) at Ejigbo and Mosimi. According to our intel, other independently owned depot did not receive products and when they did it was at a higher price thus further depleting their margins. They explain that for fuel to be widely available, the NNPC will have to make products available at all the major depots in the country.
Hoarding & Diversion
We also understand that some fuel marketers are allegedly hoarding petrol, creating a scarcity that allows them sell at higher prices (in Jerry cans) to vehicles owners desperate to fill their tanks.
Nigeria’s downstream regulator, DPR also reported a string of clamp downs during the weeks as they went after stations suspected of hoarding the product. There has also been reported cases of diversion of petroleum products to other parts of the country where petrol sells for higher, in other to increase their margins artificially.
Data from the National Bureau of Statistics indicate that about 17 states sold fuel above the official pump price of N145 with States like Bayelsa, Ebonyi, Abia, Rivers and Akwa Ibom selling above N147.
The issue of diversion is now so bad that even the NNPC Group Managing Director, Dr Maikanti Baru, disclosed that “a nation that consumed 35 million litres suddenly increased consumption to 85 million litres due diversion to neighbouring countries. “
Supply Chain issues
The NNPC has also had challenges getting petrol across to its various depots on time, worsening fuel shortages across the country. The Nigerian Association of Road Transport Owners (NARTO) and Petrol Tanker Drivers (PTD) also faced challenges loading fuel from depots, making it difficult for them to distribute petrol in most parts of the country.
End in sight?
The NNPC GMD, Baru, informed reporters on Thursday that fuel scarcity will normalize by Friday and that fuel queues will begin to disappear by the weekend. Fuel queues are still noticeable in most parts of Lagos and Abuja as Friday, December 22nd 2017.
This article has been updated to include limited supply to depots