Fuel scarcity in Nigeria can be unavoidable as foreign banks stopped providing the credits of facilities of petroleum imports. Therefore, fuel demands will not be meet in the short term, and the importers of petroleum products can already count the decline in revenues. The foreign banks suspended long and short term credits for Nigeria. The fuel scarcity in Nigeria can now happen due to the failure of markets to meet the obligations in the foreign currency. The estimated obligations are around $950 million.
Fuel scarcity in Nigeria Top 3 news
Foreign Currency crisis continues
Therefore, if these demands of foreign obligations are not met, then Nigeria should completely rely on the Nigerian National Petroleum Corporation. If they can`t help Nigeria to supply the demand, then the Fuel Crisis in Nigeria can become a reality. The General Managing Director of the NNPC, Dr. Ibe Kachikwu explained that the NNPC could supply only 50% of demands of the market. With all the problems in the fuel industry – it`s impossible to demand something more from the company. It means that Nigeria can expect another episode of History of fuel scarcity in Nigeria. Even if Nigerians do not like this series, they are left with no choice, then to wait for another day with no fuel.
The Chief Executive Officer and Chairman of Integrated Oil and Gas, Emmanuel Iheanacho on the forum the Lagos Chambers Commerce, also explained that nothing could be done regarding petroleum industry without access to foreign exchange that will organize and define the market. No independent solution would help the restructuring the nation which depends on less heavily on the import and consumes foreign exchange. Emmanuel Iheanacho also discussed reservations about the Petroleum Equalizing Fund. He added that it`s not a necessary to tax on trade. It can only stress the pipelines and products companies. Therefore, it can only show the reduce of the trade involvement.
Recently abandoned fuel subsidy program by the Federal Government left market traders with billions of Naira debts. They received payments in N413 billion and N48.2 billion in March. They managed to owe more than N400 billion. It was a tremendous federal payment check if compare with strict fuel prices regulations and accessing on the foreign exchange market. That caused fuel scarcity in Nigeria and the Government was left with no choice than to make some steps to rectify the problem. It provided the rise of the petroleum price from N87 to N145. It also provided the availability of foreign exchange and its improvement through the free flat foreign exchange regime. The Government also introduced innovative parent-subsidiary towards the foreign exchange sourcing arrangements. These arrangements provided a steady supply of petroleum products. Still, fuel scarcity in Nigeria now raises fresh concerns about the product supply.
Marketers announce a new problem connected with the CBN governor that promised some help for traders. Still, the forecast is not welcome for Nigeria, even if the Government gives all N470 billion – nothing will happen. Petroleum Marketers call for the government to intervene and settle down the debts. Nevertheless, the situation where the government intervenes in a free market is also unwelcome.
Fuel scarcity in Nigeria in the first five months of 2016 led to the long queues and reduced economic. Should it be also mentioned bout the overall frustration? No fuel regulations and no help from the government? Then Nigeria should expect another fuel scarcity again.
Can the strike of Nigerian workers lead to the fossil fuel scarcity in Nigeria?
On Wednesday NUPENG started a new wave of demonstrations. It`s called the three-day nationwide warning strike from the Nigeria Union of Petroleum and Natural Gas Workers. It was created due to the unresolved labor issues connecting with gas and oil multinational operating companies. The NUPENG is one of several labor unions that started criticizing gas and oil companies for sacking workers over the last few months. The strikes are beamed to cover the job, and pay losses. The strikes can involve up to 10 000 workers nationwide.
The situation of the job losses remains the same in both NNPC and private depots in Lagos. The union also mobilized members to ensure that the government and oil factory owners would hear their causes.
Nevertheless, the representatives of the National Executive Council still did not meet with Federal Government representatives and international oil companies. The leaders of the union were about to decide whether they should continue strike or suspend it. Everything depends on the decision of workers and the leaders of the union.
The results of the strike are now clear – all depots in Lagos were not loading petroleum products. Petroleum Tanker Drivers were seen discussing the ideas of the strike. The drivers believe that the Government is about to meet with leaders of the union and discuss the potential exists from the Fuel crisis in Nigeria and labor rights.
Aviation fuel scarcity in Nigeria
The problems of Nigeria do not stop on the land. It also continues in the Air. Airline officials are complaining about fuel scarcity in Nigeria. That provided a total delay of flights in all airports of Nigeria. The officials provide the information that Nigeria can no longer meet the demand of the airlines in fuel. Therefore, the delay of flights will continue. Even if the prices rates for fuel have not changed and remained on the level of N160-N180 per litter. Nigeria can`t provide the overall daily demand of 500 000 liters per day. Most of the airports had to go in Kano for the aviation fuel. It provided some continuance of flight operations within the country.
Fuel subsidy and causes of fuel scarcity in Nigeria today
Fuel Subsidy in Nigeria 2016
Nigeria is the largest Oil producer in Africa, but it now suffers from the losses of the economy. One of the main losses is connected with fuel scarcity in Nigeria. The Government refused to continue the subsidy of fuel. It provided the quick raises of the fuel prices. The reasons for the Government decision are next.
Nigeria expected to spend five billion dollars on keeping the fuel subsidies. Nevertheless, according to the reports from news and police – petroleum industry subsidizing is highly corrupted and insufficient. The Government did not expect that the fuel subsidy could severely affect low-income earners and continuance of the fuel scarcity. It also provided protest on the streets of Nigerian cities with people marching and shouting: “Stop Corruption – Not Subsidy.”
Global Oil prices drop in fuel scarcity of Nigeria
International Monetary Fund advised Nigerian Government to remove subsidies. The global oil prices should have provided the drop of petroleum prices. Therefore, Nigeria despite its dependence on revenues had no ability to sustain the fuel subsidy.
Nigeria started subsidizing the petroleum industry in the 1980s. The state-owned company, the Nigerian National Petroleum Corporation, should have provided the unification of prices according to the demands of the global market. Then, the President Olusegun Obasanjo declared that Nigerians wouldn`t afford the world price of petroleum and he introduced his subsidy plan.
Smuggling and diversion
The low price for Nigerian Petroleum provided new schemes for corrupted senior government officials. They have their dark deeds with marketers and transport companies. They managed to buy petroleum products with low prices in Nigeria and smuggle it to the nearest West African countries, like Benin, Togo, Chad, and Cameroon.
Nigerian economy relies heavily on the crude oil export. Low international market prices forced Nigeria Government to diminish the fuel subsidies. It slashed the countries growth prospects. With no leashes on the petroleum prices, the standard of living in the country fell. The Failing pump price of the crude oil resulted in the low revenues and fall of Naira and with no fuel subsidies – Nigerians have to pay more for fuel. This automatically led to the increase of goods and services.
Competition in the oil industry
Nigerian Ministry of Petroleum promised that removing subsidies for fuel would have led to the new players on the Nigerian petroleum market. Still, these players are not seen yet, and the border with Nigeria countries also suffer from causes of fuel scarcity in Nigeria as the countries goods increased in prices.
Foreign Exchange Crisis in Nigeria
A major influence on the increase in fuel prices came with the lack of foreign currencies in Nigeria. The local oil refineries were not ready to meet domestic demands. Therefore, fuel import was advised. It meant only with the subsidy withdraw. Nevertheless, fuel importers got the currencies from the local black markets. It meant only the increase of petroleum prices and lack of the foreign currency. The crash of Naira only got the petroleum prices higher and it provided the fossil fuel scarcity.
Causes of fuel scarcity in Nigeria
It`s clear that the Government has no clues how to stop the current fuel scarcity in Nigeria. It`s expected that the citizens should wait for another round of fuel problems in Nigeria. Therefore, what are the causes of fuel scarcity in Nigeria?
It appears that marketers are not willing to pay the government in returning for their subsidy claims. It means that they own a large sum of money to Nigeria. The Government accused Marketers in creating a new fuel crisis, while marketers remind to the Government about the promises connected with the free foreign exchange.
Fuel crisis benefits for some people
People will always find their way to make money. If for the most people in Nigeria the fuel crisis is a tragedy and they want it to end, some people can have benefited from the crisis. Therefore, these people have a desire that this crisis will continue and never end.
The NNPC can`t provide the full demand of the domestic market. It means that Nigeria wants from the importers to provide the fuel. The NNPC can`t provide enough petroleum on the domestic market, and it couldn`t foresee that the demand of the market would be increased.
The Wide Gap between official and real foreign exchange
The government can provide neither enough dollars nor enough petroleum. Therefore, the companies had to scavenge for the dollar within the country. It means to buy it for N325 where the official rate is N197.
Diversion of supplies
The corrupted officials just have a desire to do business. It means that they smuggle large portion of the fuel to the nearest countries with much higher prices for fuel. They sell fuel and allocate them in the depot of independent marketers. These marketers are willing to pay much more if they want to sell the fuel above regulate prices.
One of the biggest headaches in finding the solution to the fuel crisis in Nigeria is fighting with vandals. It should be said about terrorist organizations who sabotage the work of crude oil pipelines. One of the most notorious groups is Niger Delta Avengers. They managed to provide a large decline in the crude oil output in 2015-2016.
Nigeria has only four refineries to serve the demand of the 40-50 million liters of fuel per day. It`s clearly not enough to even for the half of the population. Therefore, it`s not a surprise that the biggest oil exporter in Africa has a fuel scarcity.