Fuel scarcity not due to supply issues – Mele Kyari

The Group Chief Executive Officer of Nigerian National Petroleum Company (NNPC) Limited, Mele Kyari, has clarified that Nigeria’s fuel scarcity challenges are not due to supply constraints. 

Mr. Kyari stated this during an interview, earlier today, on the Good Morning Nigeria show via the NTA News Network.

Kyari’s argument: The NNPC CEO said Nigeria is a huge country where fuel demand is high. Consequently, up to 1,700 fuel trucks have to be on the road daily, and it will probably take two weeks to do a round trip to deliver fuel. Once there are accidents and other road travel issues, there is a glitch. This glitch becomes a major supply/distribution problem.

He explained further that sometimes, panic buying comes into play, when consumers buy more than they need now, putting a further strain on supply levels. He said that there is no scarcity of fuel and consumers are merely responding to the realities the country is facing today.

One of the realities he pointed out is the fact that queues are more in filling stations that sell at regulated prices (180 per litre), meanwhile, those selling at arbitrary prices (up to N350 per litre) have no queues. He said:

• “We do not have a supply problem because as we speak now, we have over 28 days of supply even if we evacuate up to 60 million litres of PMS every day. We have a distribution problem that comes up as a result of the shift in the cost of logistics in our business taking fuel from the mother vessels to the terminals into trucks to the fuel stations.
• “Several things have changed and we do not have an automatic adjustment system that will resolve this as a result of the fuel subsidy regime we are currently operating in the country. However, fuel subsidy payments are understandable to protect consumers from the vagaries of market forces.”

Why fuel prices are ridiculously high: Mallam Kyari said that once there is a glitch, people take advantage. He maintained that in the sense of recovering costs, market players tend to escalate arbitrage to unreasonable levels.

Mallam Kyari also said that the recent meeting held with stakeholders across the value chain yielded some fruits and all stakeholders are now willing to work together to ensure that normalcy is restored as regards fuel purchases. He said there is an understanding that some of these depots where challenges occur are tackled and logistics costs are handled effectively.

• “Once you crash the prices at the depot, the prices at filling stations will crash and that arbitrage will go. Then people will see that the prices across the stations, whether they are owned by NNPC or independent marketers, will have some normalcy, and fuel queues will vanish,” he stated.

Across the borders: Mallam Kyari said that Nigeria accounts for over 70% of consumption in West Africa, and the country has neighbors that cannot afford to import petroleum products. He maintained that based on data and monitoring of the movement of petroleum products, Nigerian fuel can be found in other countries. 

According to him, there is hardly any West African country that Nigerian fuel is not found. So, it is almost impossible to eliminate cross-border smuggling until the arbitrage challenge is eliminated.

Chain of engagement: In the course of his interview, Mallam Kyari said the NNPC understands the frustration of Nigerians. However, he pointed out that the NNPC is a part of the chain of engagement regarding the availability and distribution of fuel in Nigeria.

He said the NNPC has its limits and can only intervene in resolving some challenges like road reconstruction, to ease the distribution of fuel. He said Nigerians should understand that there is a presence of greed across the value chain – depots, filling stations, trucks to those encountered on road trips, where all kinds of fees (state, local government) are collected and these add up to logistics costs. He also noted that this greed is not present in the NNPC.

For the record: On Wednesday, February 1, Nairametrics reported that the National Operations Controller at the Independent Marketers Association of Nigeria (IPMAN), Mike Osatuyi, has assured that Nigerians will likely see more fuel availability in the next two weeks.