It was with rapt attention that President Goodluck Jonathan listened to the briefing by Mr. Godwin Emefiele on why the Central Bank of Nigeria (CBN) had to unify the foreign exchange markets by scrapping the bi-weekly Retail Dutch Auction System. With graphic details about how some marketers were round-tripping the dollars purchased from CBN, the apex bank governor explained why if nothing was done, Nigeria’s foreign reserve could soon be depleted. An ominous report from Standard & Poor’s, the international credit-rating agency, which Emefiele showed the president, buttressed his position. By the new measure then being proposed, the Petroleum Products Pricing Regulatory Agency (PPPRA) would no longer enjoy any special dispensation on Forex, which the marketers would have to source from the interbank foreign exchange market.

While the president did not discourage the CBN from going ahead with the policy, he nonetheless made one comment that has turned out to be prescient: “I hope this measure will not disrupt fuel supply, especially at this crucial period.” Whatever assurances Emefiele may have given to the president, by not taking into confidence the Nigeria National Petroleum Corporation (NNPC), which accounts for 50 percent of national fuel need (and often takes responsibility for the entire 100 percent as supplier of last resort in times of crisis) before announcing the measure, CBN was taking a gamble. Not surprisingly, the moment the decision was made public, virtually all the independent marketers decided to close shop. That is the beginning of the fuel scarcity that Nigerians now experience but that is just part of the story.

Last Thursday in Lagos, Emefiele held a crucial meeting with fuel marketers and managing directors of banks, following threats by the bankers that they would no longer finance fuel importation because of accumulated debts. Although the Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, had assured the marketers a few weeks ago that the N264 billion owed them would be paid, the commitment had not been met. But the real problem, according to insiders, was not so much that the payment had not been made but that a letter was believed to have been written by Okonjo-Iweala to the PPPRA, asking the agency to stop payment on foreign exchange differentials and interest on “delayed payment” (payment exceeding 45 days after supply).

With the bankers adamant that they would no longer fund fuel importation because they were already experiencing liquidity problems, the CBN Governor last Thursday pleaded with them to reconsider their stance, mindful of the political sensitivity of the period we are in. Many of the bank CEOs who spoke said they were already having difficulty with their boards because of lending to upstream, midstream and downstream sectors of the oil and gas industry and that they funded both the Shell and Chevron divestments. They also reminded Emefiele that he himself warned only recently that they were getting too exposed to over-borrowings from the sector. But as an insider told me, the marketers, acting in collusion with the banks, thought they could use this election period to pressure the Federal Government into paying all their arrears at once.

At the end, the bankers gave a condition under which they would continue to fund fuel importation: Emefiele would have to persuade Okonjo-Iweala to direct the Debt Management Office (DMO) to issue the requisite Sovereign Debt Note (SDN) and that the Federal Government must liquidate the existing subsidy debt. Apparently in line with that agreement, Okonjo-Iweala on Monday released N59 billion to the marketers through the PPPRA but that can only provide a temporary reprieve.

However, Okonjo-Iweala confirmed on Tuesday that the Federal Government had reached an agreement with the marketers on the N185 billion balance of their payment. “As part of this agreement, we are paying not only the costs they’ve incurred and their fees but also interest and Forex differentials,” she said, adding that the DMO has issued SDNs to cover N100 billion out of the N185 billion agreed upon as balance for the next payments while the CBN “has also given approvals for the banks to issue letters of credit.” Okonjo-Iweala further explained that the scarcity is being fuelled by “a mix of factors including disruption of pipelines and logistical issues and they are being attended to urgently.”

While I am aware that all the critical stakeholders in the sector are working hard to ensure that the fuel queues disappear, it could not have been pleasing to the president that the scarcity has come at a period he is seeking re-election. But it is a shame that some people within the Peoples Democratic Party (PDP) campaign structure would politicise the issue by blackmailing the marketers just as it is lazy of the opposition All Progressives Congress (APC) to mouth some ill-digested reasons for the scarcity. The real challenge today is not availability of PMS, given the prompt intervention by the NNPC, but how to deliver the product to every corner of Nigeria on a sustainable basis.

As at Tuesday, the NNPC had in its stock, 676,651,000 (676 million) litres of fuel which is enough to last Nigeria about 17 days while another 1,097,077,392.92 (one trillion) litres is expected to arrive within the next few days, thus pushing the stock to 1,773,728,392.92 litres. Against the background that the total national need for the period until March 31 is 1,160,000,000 (1.16 billion) litres, that means there would be a surplus that could last the country until late April at a national consumption rate of 40 million litres per day.

In my column of last week “On The Trail of Oil Thieves”, I explained the problem that has led to a situation in which 1212 trucks are put on the dilapidated roads in our country on a daily basis just for us to have fuel. It is all the more unfortunate when one realises that the idea of having several depots across the country was so that no truck should travel beyond a radius of 250 kilometres to discharge fuel. And despite that the depots are in good condition, practically all of them have been rendered redundant because of the activities of pipelines vandals and oil thieves.

To understand the waste within the system, here is how the pipelines delivery of fuel should work. From the Atlas Cove in Lagos, fuel is pumped to Mosimi, which then branches into Ore and Ibadan and terminates at Ilorin. That accounts for the South-West axis where between N600 to N700 million is lost on a weekly basis to vandals who either insert valves with which they connect to tankers or scoop the fuel in their canoes laden with drums. Because of the several breaking points, pressure is usually low in the process of pumping but detecting the actual place takes time and repairing such damages even longer periods. Yet as bad as that situation may seem, the situation is worse in other parts of the country, perhaps because of the distance.

From the Warri depot, fuel is pumped to Benin and from there to Suleja, which then discharges into Kaduna. From Kaduna, fuel is pumped to Kano, Jos and Gusau. It is from Jos that Gombe is served and from there to Maiduguri, which is the northern terminal. Also from Port Harcourt, fuel is pumped to Aba and from there to Enugu, which serves Makurdi that, in turn, discharges to Yola. The combined storage for these 21 depots is 2.6 billion litres and that is excluding the depots owned by private individuals. But the vandals have made fuel supply through the pipelines a risky enterprise and for that reason, the biggest economy in Africa relies on trucking for its fuel need in the 21st century.

With the situation of things in our country today, as I explained last week, fuel scarcity will be with us for a long time and we may also not be able to develop the refining capacity to meet national need, except we tackle the issue of pipelines vandalisation. In my earlier column titled “Petrol and the Looming Catastrophe” on 17 January 2013, following an explosion at Arepo Village in Ogun State caused by pipelines vandals many of whom lost their lives, I engaged this same problem and below is an excerpts from what I wrote back then:

“With 5,120 kilometres of pipelines network, 2,965 kilometres of sea-lines, 112 flow stations, 16 gas plants, 126 production platforms, 17 loading buoys, 13 export terminals, 21 petroleum products depots, nine LPG Depots and 14 pump stations, Nigeria has a huge oil and gas assets but these assets are also perhaps the most unsecured in the world. That explains why we now have a situation in which almost everyone believes he could help himself with what belongs to all of us without consequences.

“Pipelines vandalism has indeed become such a lucrative and organised criminal enterprise that in its Christmas edition last year (2012), PUNCH carried a story of how a young medical practitioner abandoned his stethoscope to act as middleman for vandals. ‘People started calling me ‘oil doctor’ because I always had ready buyers for all kinds of petroleum products. Oil business is very lucrative especially in Kogi State where as many as 17 trucks of petroleum products could be siphoned and sold in one night,’ the medical doctor turned pipelines vandal said.

“Yet this is something that has been going on for far too long. For instance, a March 4, 2010 working paper by then NNPC Group Managing Director, Mr. Mohammed Barkindo, is quite revealing. Looking at the number of incidences and the costs incurred on losses and repairs of petroleum products pipelines over a period of ten years (between 2000 and 2009), Barkindo painted a picture of a sector in serious crisis.

“According to his figures, within that ten-year period in Port Harcourt, there were 199 fire incidences, 7,961 cases of pipeline vandalism and 144 ruptures, the total cost of which amounted to N78.15 billion. In Warri, there were 95 fire incidences, 3,181 cases of vandalism and 78 ruptures, the total cost of which was N20.39 billion. In Mosimi, there were 69 fire incidences, 2,320 cases of vandalism and 120 ruptures, putting the total cost at N78.15 billion. In Kaduna, there were 33 fire incidences, 817 cases of vandalism and 51 ruptures, totalling N1.6 billion in financial cost.

“In Gombe, there were 22 fire incidences, 1406 cases of vandalism and 5 ruptures, with the cost put at N690 million. In all for the five pipelines highlighted, within a period of a decade, there were 418 fire incidences, 15,685 cases of vandalism and 398 ruptures. The total cost for that ten years was N174.57 billion.

“Even if we use today’s value, that is more than a billion dollars stolen or wasted. Yet as grim as that may seem, the situation is actually worse today given the latest statistics on breaks and ruptures where year 2010 recorded the highest number in history followed by 2011 and 2012 in descending order which is at least good news. According to a November 2011 PPMC data, financial losses incurred between 2006 and July 2011 to pipelines vandals are as follows: N69,764,197,815 for PMS; N7,556,346,473 for DPK; N9,970,210,900 for AGO and N169,869,483,266 for crude. The total: N257,160,238,454. We are talking of almost two million dollars for a period of just five and a half years. How can a nation continue to waste its resources like this?

“But the impact of the activities of these criminal gangs goes beyond the value of products being stolen and the money spent on expensive repairs, litigation and remediation costs. The real problems are that they force refineries to operate below their installed capacities; encourage high level of trucking thus putting more pressure on our roads (aside causing several accidents); they ignite fire incidences that have claimed several lives, including innocent bystanders and also cause environmental pollution.
“Against the background that pipelines are vital security assets of any nation, in most countries, tampering with them is almost akin to treason. But we are yet to come to terms with this critical challenge and for that reason, criminals are having a field day at our collective expense as a nation...”

What the foregoing reveals quite clearly is that the protection of pipelines – without which there will always be fuel scarcity in many parts of our country – has become a serious national security issue. I know many commentators have talked glibly about building local refineries but the fact being ignored is that even if the Petroleum Industry Bill (PIB) is passed today, reform efforts within the sector which would include building refineries as well as stable electricity in the power sector would remain a mirage until we effectively confront the challenge of effectively manning our pipelines.

I am aware that the timing of this current fuel scarcity is most inauspicious but perhaps it is just as well. If President Jonathan is re-elected, this should be another wake-up call that he has to find a lasting solution to the problem that would not just go away. And if the winner happens to be Major General Muhammadu Buhari (rtd.), then I extend to him my sympathy, given the burden of expectations that would come with such victory and the enormity of the challenge he would inherit in the sector.

•This piece by Adeniyi (shown in photo) originally appeared in his column “The Verdict” in today’s edition of ThisDay. He can be reached via olusegun.adeniyi@thisdaylive.com

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