"Nigeria dispute fuels petrol shortages
By Matthew Green in Lagos
Published: May 11 2009 16:57 | Last updated: May 11 2009 16:57
A showdown between President Umaru Yar’Adua and powerful Nigerian oligarchs over his moves to break their grip on the lucrative fuel importation business has led to the country’s worst petrol shortages in years.
Nigerian commentators see the dispute as the biggest test yet of the ability of the president’s two-year-old administration to confront business and political elites with a vested interest in opposing his plans to remove key bottlenecks in the economy.
The marketers have mounted a stark demonstration of their power by suspending supplies that make up 50 per cent of Nigeria’s fuel consumption, arguing that the government’s steps towards dismantling the existing pricing regime mean it is no longer commercially viable to import petrol.
Odein Ajumogobia, the minister of state for petroleum, said he was seeking ways to ensure the Nigerian National Petroleum Corporation, the state oil company, could close the supply gap.
“Marketers are in many ways holding us to ransom,” Mr Ajumogobia told the Financial Times. “Fortunately there are options and we are exploring those options.”
The lack of fuel has led to hours-long queues at filling stations and the appearance of furtive youths selling black market petrol in jerry cans in the streets of Lagos, the commercial capital, creating an atmosphere of mounting popular frustration. Emerging from behind a public toilet in the edgy Bar Beach area, a young man who gave his name as Segun brandished a 20-litre container of fuel at a passing motorist. “I say,” he yelled. “How much you want to give me?” He was asking 50 per cent more than the official price.
The battle hinges on Mr Yar’Adua’s plan to end Nigeria’s long-standing reliance on fuel imports by encouraging private investment in the refining capacity needed to meet burgeoning demand in Africa’s most populous nation.
Years of neglect and mismanagement at Nigeria’s four state-owned refineries have created the paradoxical situation whereby one of the world’s biggest exporters of crude must spend huge amounts importing petrol and diesel.
The situation has allowed companies such as African Petroleum, controlled by Femi Otedola, rated by Forbes as one of Africa’s billionaires, and Conoil, chaired by Mike Adenuga, a telecommunications, banking and oil magnate, to thrive.
Under the current system, the government pays petrol importers billions of dollars a year in subsidies to ensure pump prices stay artificially low. In a country with woefully inadequate electricity, roads, health and education services, the price cap – currently N65 a litre of petrol – is seen as one of the most tangible benefits the state provides. The petrol subsidy has cost the government some N1,600bn ($11bn, €8bn, £7bn) in the past two years alone, a figure roughly equal to this year’s budget deficit.
As well as being a burden on state finances, the arrangement has served to prolong Nigeria’s dependency on imports because investors are reluctant to develop refineries while the price for the end-product remains fixed by the government.
Mr Yar’Adua has pledged to dismantle the system by allowing full deregulation. Importers accuse the government of bungling the implementation of the policy by stopping subsidy payments before reaching an agreement on the details of how a more liberalised regime will work. “The government is not prepared to give marketers a chance,” said Tunji Adeniji, national president of the Independent Petroleum Marketers Association of Nigeria.
Copyright The Financial Times Limited 2009"