Nigeria’s Curious Case of Fuel Scarcity

Over the last few weeks, Nigerians have again been faced with an age old occurrence, commonly dubbed fuel scarcity. This is a national phenomenon that has recurred over and again. There are numerous and quite memorable accounts of people taking turns to spend days and nights at petrol stations, on endless queues, in the attempt to buy fuel for use. Many have honed additional driving skills learning to maneuver their cars into the smallest available spaces, outsmarting sleeping drivers, all in a bid to buy tens of liters of premium motor spirit, petrol. It is appalling, having this particular problem persist over the years, same manner, similar process, typical triggers, without a true solution. Daily national demand for PMS continues to be an educated guess and has consistently ranged between 35 – 40 million liters in the recent past. In basic economics, scarcity arises from a limited availability or supply of resources compared with the attendant demand for the same. So what suddenly truncated national PMS supply?  For a country whose citizens depend squarely on petrol (Premium Motor Spirit) as fuel to power their vehicles and household generators, why is the supply chain periodically challenged?

It will be odd to hear a crop farmer complain of hunger when his harvest is obviously full, except his produce is being constantly pilfered under his very eyes, or the infrastructure required to process the crops into valuable food is unavailable, dilapidated or out dated. However, this is a clear picture of the national situation. Sitting on such massive hydrocarbon reserves, we have been unable to effectively operate and manage the infrastructure to harness value accordingly. The four refineries with a total refining capacity of 445,000bpd operated at an average capacity utilization of approx. 28% YTD Oct 2013 – processing 124,600bpd of crude able to yield approx. 10 million liters PMS/day.

Source: http://www.nnpcgroup.com/PublicRelations/OilandGasStatistics/MPIFigures/MonthlyPetroleum/tabid/130/FolderID/148/Default.aspx

Comparing this local supply to the anticipated demand of 40m liters, there is a significant volume left to supply. Where an organic solution to production fails, an inorganic intervention may suffice. As such, the nation constantly needs to import the shortfall of products to satisfy demand. When importation is impaired, delayed or truncated for the slightest reason, scarcity results. According to the head of NUPENG’s tanker drivers, “importers got their permits for the first quarter only last week and this has created a shortfall in supply“. Why should import permits for 1Q14 be issued at the end of February, when two-thirds of the quarter is already gone? Consequently, fuel depots across the country have been emptying on the go, and most ran out of product supplies by mid-February, according to the union head. As at January, the Petroleum Products Pricing Regulatory Agency (PPPRA) had shortlisted 32 marketing companies for importing petroleum products including NNPC (with the highest import allocation) and other major marketers. Yet, there is a shortfall supply spanning February to March.

What kind of planning results in this? Who is responsible to issue import permits? Were import permits really delayed? Why were they delayed? What happened to the principles of demand forecasting and fulfillment?  Is there some unseen angle to the story? The solution to this scarcity is not seen in the reactive measure of inspecting petrol stations to apprehend those selling above the stipulated pump price. Such opportunistic behavior is only typical of the market, where price goes up in the face of rising demand and dwindling supply, with businesses attempting to maximize an economic rent while they can. The root cause is a supply side issue. Cause and effect – Eliminate the cause, eradicate the effect. Supply! Supply! Supply!

Again, one of the core concepts of change management within any industry is communication and involvement. In the execution of projects and/or daily operations, changes are bound to occur to typical routine processes, whether anticipated or not. What makes the difference for the manager or leader is the ability, skill and will to proactively communicate change effectively to the workforce and affected stakeholders, keeping them abreast of the what, the why, the how and when of changes. Sometimes, our government agencies need to take a cue from this. Be upfront about situations irrespective of causes. Is it such an arduous task to make an unambiguous statement on national news, clearly keeping the nation abreast of when and why there is fuel scarcity, what exactly the mitigation interventions are in the short term, and what the long term solutions to prevent its further recurrence are? Unfortunately, this is a country where information asymmetry is pretty much the norm.

Is the leadership of the nation pleased to have its workforce wake up early Monday morning, with worries of how to get fuel to drive to work instead of applying same ‘gray matter’ to develop breakthrough ideas that can foster economic growth? Will we grow our GDP (leave rebasing aside for a bit) when majority of the labor force spends most of their productive time running up and about town searching for petrol stations selling fuel? Or commuters stranded at bus stops for hours because even the commercial transport system is paralyzed due to the same situation? Or researchers and technocrats spending their time at fuel queues when they should be churning out solutions and formulating policies?

Someone, somewhere, needs to fix this recurring issue once and for all! Yet, given the foregoing, one wonders when import permits for the second quarter will be granted! Scarcity continua?