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No End To Scarcity, Price Increase

By David Ogah and Temiloluwa Adeoye
24 May 2015   |   1:38 am
DESPITE the huge sum the Federal Government spends on kerosene subsidy in order to make it affordable and available, respite is yet to come the way of the Nigerian masses, as the commodity continues to remain scarce. Kerosene is a product commonly used for cooking and other energy needs.
Fuel scarcity

Fuel scarcity

DESPITE the huge sum the Federal Government spends on kerosene subsidy in order to make it affordable and available, respite is yet to come the way of the Nigerian masses, as the commodity continues to remain scarce. Kerosene is a product commonly used for cooking and other energy needs.

This year alone, subsidy component in the country’s budget is about N40 billion. In the last four years, over N1 trillion went into kerosene subsidy, yet the product could not get to the end users.

A peep into records at Pipeline and Products Marketing Company (PPMC), a subsidiary of the Nigeria National Petroleum Corporation (NNPC), indicated that the company imported a total of 9,732,437.17 metric tones of kerosene between 2010 and 2013. Despite the high volume, there is hardly anywhere in the country where kerosene was sold at the official price of N50 per litre.

At the NNPC mega stations, the product is usually sold to middlemen whenever it is available, while end users wait endlessly on queue in vain without getting the product to buy.

The NNPC had in collaboration with Kapital Oil, embarked on a field distribution, which later collapsed after high level manipulations were discovered before the birth of a new initiative Kero Direct Scheme, when the NNPC entered into another deal with the Independent Petroleum Marketers Association of Nigeria (IPMAN) to improve the product supply across the country.

Under the Kero-Direct-Scheme, IPMAN received kerosene allocation and supplied to its members nationwide for effective distribution. The scheme worked for only one month before the product became scarce again in Lagos and its environs.

Investigations carried out within Lagos metropolis during the week revealed that kerosene was not available anywhere, including the NNPC mega stations. The only places where kerosene is sold are the small retail outlets in markets and streets.

NNPC mega stations visited at Ikorodu, Alagbado, Surulere, Ikoyi, Challenge and Lekki, none of them had kerosene to dispense. One of the stations manager at Ikorodu, who refused to disclose his name, said the last supply from the parent company, NNPC, was in February.

Although, he refused to respond to other questions relating to the scarcity, he directed The Guardian to NNPC and its depot at Wasimi, Ogun State for more information on scarcity of the essential product.

A kerosene dealer at Sabo market in Ikorodu, said supply has not been regular in the last one year. The woman who gave her name as Kike Oluwaseun said she has a tanker driver that normally supplies her kerosene. “Anytime I need it. I will just use my phone to call him and ask him to bring me kerosene. He comes from Wasimi. Now I don’t have enough to sell and I have been calling him since last week and he has not come to supply me,” she lamented. She sells a litre of kerosene at N120.

The legality of the kerosene subsidy has become a matter of controversy, which was probed recently by the National Assembly. The former Central Bank Governor, now Emir of Kano, Sanusi Lamido Sanusi once alleged that the NNPC was withholding revenue due to the Federation Account under an illegal kerosene subsidy claim, which he alleged had been abolished.

But the NNPC refuted the claim, saying that the government’s directive on kerosene subsidy removal was never gazetted, hence its’ inability to comply with it.

The NNPC admitted that the product has not been available to the end users at the official price of N50 a litre, therefore calling to question the need for the subsidy.

The NNPC, which enjoys monopoly of kerosene importation and the administration of the subsidy, seems to be helpless as it now encourages consumers to switch to use of gas as alternative to kerosene for cooking.

“Diversion of kerosene to neighbouring countries, industrial use, the use as aviation fuel, sharp practices by middlemen and pipeline vandalism are reasons why kerosene is not available for domestic consumption. There are quite a number of competing demands for kerosene, and until these are addressed, by the relevant agencies, the issue of kerosene not being available for domestic use will continue to reoccur every now and then.

The way out is for this committee to collaborate with the NNPC to encourage the sale of liquefied petroleum gas, otherwise known as cooking gas,” former NNPC Group Managing Director, Andrew Yakubu, was quoted to have said. Efforts to find out why the price of the product continued to remain at ceiling level was not successful as all calls to the spokesman of Petroleum Product Pricing Regulation Agency (PPPRA), Mr. Lanre Oladele were not attended to. But an authoritative source at the agency said although the official price of kerosene has not changed from N50 per litre, the prevailing scarcity, orchestrated by alternative usage has kept the price high. “Kerosene has the highest complexity in the chain of petroleum products.

That is why it changes hands at any point in the chain. Kerosene is a premium product, it has alternative uses. There are two grades of kerosene, the Aviation Turbine Kerosene (ATK), used in the aviation sector and House Hold Kerosene (HHK) used for domestic cooking.

Nigeria remains one of the few countries where HHK is in high demand, but ATK has dual uses: fueling of aircraft and for domestic cooking. This grade is not too different from HHK and so it can be used for cooking and as aviation fuel.

But because our refineries don’t produce enough kerosene, the country has been importing ATK grade of kerosene, which is also referred to as Dual Purpose Kerosene (DPK). A superior form of diesel.” Giving reason for the scarcity of the product, he said, “marketers have been using the product to adulterate diesel to make more profit. These two products can blend perfectly well.

Blending one litre of DPK with diesel will give the marketer N100/litre extra profit. So the temptation to blend DPK with Automotive Gas Oil (AGO) is very high”, the source said According to him, the end product of the blend between DPK and diesel is the emulsion, which is being used by construction companies for road construction.

The usually reliable source also identified other reasons for the scarcity of the product, when he said a sizeable quantity of kerosene imported into the country finds its way, through the porous borders, into neighbouring countries and “consequently what is left for the real domestic market is restricted and when there is scarcity, demand will be high and then the price will go up. That is what is happening to kerosene is our country,” he said.

The secretary, Lagos Petroleum Tankers Drivers Association, an arm of Nigeria Union of Petroleum and Natural Gas (NUPENG) Workers Union, Tokunbo Kodoro, blamed marketers for the scarcity, saying they have been avoiding the distribution of the commodity, which they claimed had since been partially deregulated. The scarcity cuts across all petroleum products.

That is why commuters at airports get stranded intermittently, because aviation fuel like kerosene has become scarce. Continuing, he said, “The attitude of the marketers is also an issue, because they decide which product is more lucrative for them to import.

The government had directed that kerosene be sold at N50 per litre and the marketers left the kerosene distribution for NNPC, which is administering the partial subsidy on the product”. According to Korodo, the NNPC has monopoly on kerosene import, yet it has no facilities to dispense the product that is of high demand “The NNPC has monopoly on kerosene, but the facilities are not functioning, they don’t have the facilities to dispense.

Kerosene is partially deregulated, yet it remains unavailable at filling stations because no one wants to sell at the actual rate of N50 per litre. The industry needs total reformation because corruption has eaten deep into it.

Corruption needs to be brought to an end now. The lack of political will, on the part of the government, is another hindrance to the progress of the sector,” he said On total deregulation, Kodoro said, “nobody is opposing deregulation. We only oppose import- driven deregulation where people eventually lose their jobs, while another party is smiling to the bank. We want the kind of deregulation that will increase our Internally Generated Revenue (IGR) and also generate employment.”

Major marketers said they have not imported kerosene in the last three years. The Executive Secretary of Major Marketers Association of Nigeria, Olufemi Olawore, told The Guardian, that his members were into the importation of aviation fuel and not domestic kerosene.

“As at today, major marketers import only aviation kerosene, which is sold all over the world as aviation fuel and it is very expensive. We are not part of kerosene subsidy, and so no marketer wants to bring kerosene into the country to sell at N50, the price at which NNPC is selling because of the subsidy.

At the Apapa jetty where major marketers are operating, they have not received kerosene in the last three years. So NNPC should tell you where kerosene is located and those benefitting from the supply and distribution.”

However,PPMC said the product was available, adding that it was still in the business of importation and distribution of the commodity at subsidised price of N50 per litre, at NNPC mega stations nationwide. Francis Nasir, the company spokesman, said the scarcity of the commodity could be traced to the activities of middlemen in the product’s supply chain, adding that the attempt to end the scarcity made his company to introduce kero direct and kero correct initiatives, in order to make it available directly to the end users.

He said the challenge then was the size of the country, as it was difficult to cover the entire country under the initiatives. “There are so many competing demands for domestic kerosene, which is the only type of kerosene being subsidised. But this product often finds its way into aviation, manufacturing and construction sectors. With this kind of competing demand, the price will be high. The NNPC ensures that kerosene is available at N50 per litre, but the role of middlemen in the distribution chain has made the price to be above the official price.

We have tried to combat that by introducing kero direct and kero correct, which was successful, but the country is too wide to be covered under the initiatives,” he said. He debunked allegations that even the NNPC mega stations don’t have the product to sell directly to the end users, saying, “some NNPC stations are mere dealers, they are not owned by NNPC.

Those are the ones which will receive supply and sell to middlemen, who will in turn sell to end users at high prices. Some of them had been sanctioned by closing them down because of these irregularities. The mega stations owned by NNPC, they receive sup