We live in a time where information is readily available to help both businesses and individuals plan and make good decisions. Yet, in 2015, Nigeria still struggles with primary data and statistics to enable proper national planning. Almost 3 decades since oil was first discovered, the opacity within the industry is appalling. Nobody seems to know how much oil is produced per day at each wellhead, the volume of oil stocked at each refinery on a daily basis or the inventory is held at the refineries hold on a going basis. It is not surprising that a popular joke around suggests the Nigeria National Petroleum Corporation (NNPC) does not even know how many bank accounts it operates!
How Much Petrol Do We Consume?
In its November 2011 report on “The real cost of subsidy and tax implications, PWC estimated our daily consumption as 32 million liters. According to Punch in October 2012, demand was 40.32 million liters per day. The Journal of Petroleum and Gas Engineering in November 2013 puts this figure at 30 million liters per day. In the same month, November 2013, an online news platform, published national daily consumption as 39.66 million liters, quoting the immediate past Minister of Petroleum. September 2014, another online news platform reported daily consumption as 40 million liters per day. February 2015, The Nigerian Guardian reported same national metric as 40 million liters per day. This is probably why the current public impression is somewhere between 30 and 40 million liters per day. What is the basis for these figures? Is there any clear statistical method to support this? If we are unable to accurately estimate daily demand, how do we know what quantity of petrol to import? It seems Nigeria does not know how much petrol it consumes, but like our former President once said, maybe America will know… or perchance the Nigerian Bureau of Statistics might help. In May 2015, the NBS initiated plans to conduct a survey on domestic supply and demand for petroleum products. Hopefully, when this survey is completed, we will have clarity on how much petrol Nigeria consumes. While we anticipate, let’s see whether the NNPC can help a bit.
The NNPC actually logs some data on supply and distribution of petroleum products but the reports are often delayed (most recent is March 2015, published July 2015) and carry a huge disclaimer: “Although NNPC endeavors to ensure accuracy of information in these documents, it cannot guarantee 100% accuracy nor can it be held liable for errors that may occur. Users are to note that use of any information herein is purely at their discretion.”
A review of 2014 product distribution data shows that 4,375.7 million liters of PMS were distributed across the 36 States and Federal Capital Territory by the NNPC, Major marketers and Independent Marketers. “Disclaimer: Product distribution data was not received from majors like Forte Oil, MRS Etc. at the time of the report”. 544.2 million liters of Household Kerosene (HHK) and 416. 3 million liters of Automotive Gas Oil (AGO) were distributed nationwide through the year. This puts the average monthly distribution for 2014 at 364.6 million, 45.3 million and 34.6 million liters of PMS, HHK and AGO respectively. 2014 daily distribution extracted from same data yields 12.2 million, 1.5 million and 1.2 million liters of PMS, HHK and AGO respectively.
In 2014, the FCT, Delta and Lagos States received the largest volume supplies of PMS from NNPC distribution. 2014 volumes distributed by Independent and Major Marketers are not broken down by State.
2015 daily distribution (January through March) as extracted was 12.6 million, 1.0 million and 0.6 million liters of PMS, HHK and AGO respectively.
A consistent trend observed from the NNPC reports is the average daily distribution of PMS. From 2014 through 2015 March, the data shows an average of 12.3 million liters of PMS distributed for consumption per day. If we double this to cater for disclaimers (non-available data from some oil majors) and unknowns, it results in a worst case estimate in the range of 25 million liters of PMS per day.
This raises some important questions around the difference in consumption. Does Nigeria consume 25 million liters per day or 40 million liters? How much of this is consumed locally and what percentage is smuggled to neighboring countries where petrol sells for at least N140 per liter? In a period where fuel subsidy costs exceed our capital expenditure, it is important to understand how much wastage can be cut from budgets. For this to happen, the NBS needs to be properly funded to undertake the necessary research and data gathering needed to capture local information and aid national planning.
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.
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?