Nigeria, one of the Africa’s largest oil producers, has been entangled in a fuel scarcity crisis for decades, a situation that seems paradoxical given the abundant oil reserves. The recent announcement from Dangote Refinery that its Premium Motor Spirit (PMS) is set to enter the market soon should have been a beacon of hope. However, the reaction from oil importers has reignited bickering, exacerbating the already persistent scarcity. The underlying issues contributing to this unending feud calls for exploration and advocacy for a significant shift in governance to address this crisis.
This unabated fuel scarcity not a new phenomenon. It has been a recurring issue that spans several decades, resulting in long queues at petrol stations, economic disruptions, and increased hardship for ordinary Nigerians. The primary reasons for this scarcity are complex and multifaceted, involving a mix of inadequate refining capacity, poor infrastructure, corruption, lack of political will, and policy inconsistencies.
For years, the nation has relied heavily on imported refined petroleum products to meet domestic demand, despite being a major crude oil producer. The country’s refineries have operated far below capacity due to neglect, lack of investment, and inefficiencies. Consequently, the nation spends billions of dollars annually on fuel imports, which drains foreign exchange reserves and creates vulnerability to global oil price fluctuations.
The Dangote Refinery, touted as the largest single-train refinery in the world, has been hailed as a potential game-changer for the fuel supply issues. With its imminent supply of PMS, there is an expectation that it could reduce the country’s dependence on imports, stabilise the supply of petroleum products, and even lower prices.
However, the announcement of PMS from Dangote hitting the market has not been met with universal optimism. Instead, it has sparked a fresh round of disputes among oil importers who fear the impact on their businesses. The competition between local refining and importation interests has exposed the deep-seated challenges within the nation’s oil sector, highlighting the need for better governance.
At the heart of this fuel crisis is a failure of governance. Successive governments have struggled to manage the nation’s oil resources effectively, leading to widespread inefficiencies and corruption. The absence of a coherent and consistent political will to implement policies for the oil sector has created an environment where vested interests thrive at the expense of the common good.
One of the key issues is the subsidy regime, which has been a source of contention for years. While subsidies are intended to make fuel affordable for the average Nigerian, they have often been mismanaged, leading to corruption and significant financial losses for the government. The lack of transparency and accountability in the management of subsidies has allowed a few to benefit at the expense of the many.
Moreover, the regulatory environment has been plagued by inconsistencies and lack of enforcement. The Nigerian National Petroleum Corporation (NNPC), which dominates the oil sector, has been criticised for its lack of transparency and inefficiency. This has resulted in a situation where the supply chain is riddled with bottlenecks, from importation to distribution, ultimately leading to frequent shortages.
The persistent fuel scarcity has far-reaching implications for the nation’s economy and its people. The most immediate effect is on transportation, as fuel shortages lead to increased costs, which in turn drives up the prices of goods and services. This has a ripple effect on inflation, reducing the purchasing power of Nigerians and exacerbating poverty levels.
Industries that rely on fuel for power generation are also severely affected, leading to disruptions in production and loss of income. Small businesses, which are the backbone of the economy, are particularly vulnerable, as they often lack the resources to absorb the increased costs. This results in reduced economic activity, job losses, and a general decline in living standards.
On a larger scale, the uncertainty surrounding fuel supply discourages investment, both domestic and foreign. Investors are wary of committing resources to an economy where basic as energy self-sufficiency is unreliable. This has a negative impact on economic growth and development, making it difficult for nation to achieve its full potential.
The solution to this crisis lies in improved governance. This requires a comprehensive overhaul of the oil sector, with a focus on transparency, accountability, and efficiency. The government must take bold steps to reform the regulatory environment, ensuring that it is conducive to both local refining and importation, without favouring one over the other.
One of the first steps should be the complete deregulation of the downstream sector. This would remove the distortions caused by subsidies and allow market forces to determine prices. While this may lead to short-term pain, it is necessary for long-term stability. The news of reintroduction of subsidy through back door having declared removal of subsidy and without accountability, shows hypocrisy and flawed governance. The government should also invest in infrastructure, particularly in refining capacity, to reduce the country’s dependence on imports.
In addition, there must be a concerted effort to tackle corruption within the oil sector. This includes strengthening institutions like the NNPC, ensuring that they operate with transparency and accountability. The government should also encourage greater private sector participation in the oil industry, creating a competitive environment that drives efficiency and innovation.
Finally, there is a need for consistent and coherent policies that provide a stable environment for investment. This includes clear regulations on local content, incentives for refining and distribution, and a commitment to maintaining a level playing field for all stakeholders.
Nigeria’s fuel scarcity crisis is a symptom of deeper governance issues that have plagued the country for decades. While the Dangote Refinery offers a glimmer of hope, it is not a silver bullet. Without significant improvements in governance, the fuel feud will continue, with ordinary Nigerians bearing the brunt of the crisis. The time for reform is now, and it is incumbent upon the government to take the necessary steps to ensure a stable and reliable fuel supply for the nation.
Research & Advocacy Department,
Chartered Institute of Directors (CIoD)
28, Olawale Edun Road, (Formerly Cameron Road), Ikoyi, Lagos.