PMS PUZZLE: Petrol Nigeria consumes daily dropped to about 30m liters, then dramatically went up to over 60m

The jigsaw puzzle surrounding the quantity of petrol, otherwise called Premium Motor Spirit (PMS), Nigeria consumes daily just got more puzzling as Sunday Vanguard understands that the figure went down to about 30 million liters per day after President Bola Tinubu’s ”subsidy is gone” statement of May 29, 2023, only to dramatically return to more than 60 million liters.

Multiple sources attributed the ‘magical’ rise to renewed smuggling of the product into neighboring countries where the price of the product is significantly higher than it is in Nigeria.

Until Tinubu ‘removed’ petrol subsidy via the 2023 Inauguration Day speech, the product sold for N254 but rose subsequently to N617 in Abuja and thereabouts in some parts of the country.

In Lagos where it was cheapest, it sold for about N568 while it sold higher in other South-West states like Ogun, Oyo, Ondo, Osun and Ekiti.

In the North, South-South and South-East, it was a different ballgame as the price of petrol skyrocketed above N615 while independent marketers sold above N800.

The quantity of petrol consumed daily in Nigeria has for a long time been a controversial issue with many stakeholders saying it was shrouded in secrecy especially since the quantity determined the amount to be paid as subsidy which many people including government officials benefited from.

According to the Nigerian National Petroleum Corporation Limited (NNPCL), in the first three months of 2022, Nigeria recorded an average daily consumption of 64.14 million liters, while the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) revealed in September 2022 that Nigeria’s average daily petrol consumption was 66.8 million liters.

However, at the beginning of 2023, the Group Chief Executive Officer of the NNPC Limited, Mele Kyari, said there was no credible data to ascertain the daily consumption of petrol in Nigeria while also stating that there was credible data on the actual volume of petrol evacuated from the depots.

Analysts believe the figures quoted are often that high because the bulk of the petrol earmarked for the local market is usually taken by smugglers across the borders, especially to neighboring countries, where the price of the product is very high because they don’t produce oil.

The smuggling of the product across the borders guarantees huge profits for those involved while subsidy also guarantees huge returns for marketers and government officials among others in the system.

But following the Inauguration Day pronouncement of Tinubu (subsidy is gone), daily consumption of petrol in Nigeria, according to sector regulator fell significantly.

Analysis of daily truck-out data published by the NMDPRA revealed that petrol consumption had reduced by more than 24 million liters per day on average.

The average daily consumption in May 2023 was 69.54 million liters which fell to 49.48 million liters in June, representing a 28.3% drop.

In July, this margin increased further to 34.61%, the equivalent of 24.06 million liters, and average daily consumption for the month fell further to 45.74 million liters.

The price of petrol in neighboring Benin Republic and Cameroon immediately soared, confirming the claim that both countries, among others, were befitting from the Nigerian subsidy regime.

Outside beneficiaries

Part of the reason adduced by the Nigerian government to cancel the subsidy regime is the fact that apart from the cabal using the regime to rip off the government, nationals of neighboring were also beneficiaries.

But critics say the fact that the government cannot police its borders in such a way that smuggling of petrol across the borders is stopped does not justify ending the subsidy regime that helps poor Nigerians to modulate the prices of other items that they need petrol to carry out.

Nigeria’s land borders are huge, covering an area of 923,769 square kilometres (356,669 sq mi) with borders Niger in the North, Chad in the North-East, Cameroon in the East, and Benin-Republic in the West.

And with several foot paths that lead into the neighboring countries and a few official border posts, smuggling of not only petrol but also other items like rice is difficult to control.

Meanwhile, increases in the price of crude oil in the international market have led to a rise in the landing cost of the petrol imported into Nigeria.

The implication of the landing cost of petrol has inevitably increased the subsidy margin to at least N600 per liter.

NNPCL has been the only body importing petrol and bearing the brunt of the subsidy after marketers abstained from the operation simply because they are in business to make profit.

Consequently, the debt incurred by the NNPCL arising from the funding of the subsidy as of last week and as reported by Sunday Vanguard had ballooned to over $6billion, a situation government believed was unsustainable.

The setback, according to Sunday Vanguard sources, is apparently responsible for the lingering hiccups in fuel supply in recent weeks.

One of the sources familiar with the PMS importation into the country revealed that no fewer than five vessels, which were primed to supply petrol to Nigeria, had refused to discharge the product to NNPCL due to fear that they would not be paid cash on delivery.

The insider pointed out that the mounting debt had heightened the pressure on the petroleum company, which had resorted to rationing its stock and appealing to its long-term suppliers to not cut off supply.

A senior official at the NNPCL, who spoke on the condition of anonymity, said the company was struggling to supply dealers due to shortage of product at its disposal.

The official lamented: “Bulk sales of ships and trucks to depot owners have slowed down in the last five days due to shortage of supply”.

The source added that no bulk sales had taken place since Tuesday, resulting in the scarcity in the downstream sector.

Another NNPCL staff member told Sunday Vanguard that the fuel shortage, which resulted in long queues experienced in the last two months in petrol stations across the country, were principally caused by the reduction in supply of products by suppliers who were being owed by the Nigerian oil firm.

The top official said: “I was aware that at some points in mid-August the Federal Government had to come in by giving money to NNPCL to defray some of the outstanding liabilities and boost the confidence of the suppliers to continue.

“However, what was paid was about $300 million, which only helped us getting some reprieve for about a week before the queues fully returned,” he said.

Analysts say the increases in the price of crude in the international market have also pushed up the price of imported petrol in the neighboring countries, thereby making the smuggling of the product from Nigeria where it is highly subsidized once again very attractive.

”Smugglers are once again taking petrol across the borders like they were doing before and the development has, as it were, sent the quantity of petrol consumed daily by Nigerians skyrocketing to over 60 million liters”, one industry source told Sunday Vanguard, last week.

Credit: Vanguard