Nigeria fuel imports resume after subsidy dispute

Nigeria’s fuel marketers are ending a months-long suspension of imports which caused the worst fuel shortages in years after the government started clearing hundreds of millions of dollars in subsidy arrears.

Wale Tinubu, chairperson of the Major Oil Marketers Association of Nigeria (Moman) and head of one of the country’s largest fuel retailers Oando, told Reuters that normal fuel supplies in Africa’s most populous nation should be restored within a month.

“Import orders have been placed over the last two weeks. As the government’s overall liability to the marketers has reduced, the marketers have responded by partially ordering what they would normally have ordered,” Tinubu said in an interview.

“The ships have started coming in. I would say over the next two to four weeks there should be normalcy,” he said.

Despite being the world’s eighth biggest crude oil exporter, Nigeria is forced to import about 85% of its petroleum product needs because of the chaotic condition of its four state-owned refineries.

Nigeria’s powerful fuel marketing companies, which usually account for about 60% of its total refined petroleum imports, suspended shipments earlier this year in protest at late payment of government subsidies.

The supply disruption caused chaos in cities around the country, with motorists having to wait hours in long queues at filling stations or buy from street hawkers illegally selling fuel in jerry cans at twice the usual price.

The government pays fuel marketers the difference between the regulated pump price, pegged artificially low to make it affordable for Nigerian consumers, and the cost of importation.

But the marketing firms—which include African Petroleum and Conoil, controlled by two of Nigeria’s most powerful tycoons Femi Otedola and Mike Adenuga—said payments had been delayed and a sharp depreciation in the value of the naira currency meant there was an additional shortfall.

“In the process of all these delays, the marketers had no choice but to stop the importation of products because we were at over $1-billion in outstanding subsidy claims,” Tinubu said.

He said there was an outstanding balance of about $400-million still to be paid but that a first tranche of $150-200-million had been approved and the remainder would probably be paid within the next 14 days.

“Colossal corruption”
Nigeria has said it wants to deregulate its downstream oil sector.
Privatising refineries could allow investors to restore existing capacity and potentially expand it much further, ending Nigeria’s import reliance.

It also wants to cut fuel subsidies which cost it 640-billion naira last year, almost a quarter of the original 2,65-billion naira 2008 budget.

Most Nigerians see subsidised fuel, capped at 65 naira a litre, as one of the few tangible benefits of being a crude producer. Unions had planned marches in the coming weeks to protest against the threat of higher prices.

But the government says it is the marketers and their billionaire bosses, not the consumers, who benefit most.

“The subsidy does not reach the people it is intended for,” President Umaru Yar’Adua told reporters in the capital Abuja on Tuesday.

“There is a very strong cartel in this country that is benefiting from this issue of subsidies and it has introduced colossal corruption within the system,” he said.

State oil firm NNPC, which usually accounts for about 40% of Nigeria’s fuel imports while the marketers account for 60%, said it had increased its share to about 70% in recent months to make up for the shortfall.

Tinubu said fuel marketers had been pushing for deregulation of the downstream oil sector for decades but that it needed to be a completely free market.

“We’ve been through semi-deregulation and it hasn’t worked. The reason we have queues today is because of semi-deregulation,” he said.—Reuters

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