Growing Fuel Queues in Nigeria; Why and Way Forward

In recent weeks, Nigerians have been facing a severe fuel crisis as we have observed long queues at several fuel stations across the country. Worsening shortages has triggered the re-emergence of the black market and allowed some retailers to sell Premium Motor Spirit (PMS), popularly known as “petrol”, above the approved price range set by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). In Jul-2022, the Authority had quietly approved the upward review of PMS pump prices to N179.0/litre from N165.0/litre. Notably, our market research showed that the average cost of PMS at retail outlets across the country currently prints between N200.0 – N250.0/litre. That said, the price of petrol in the black market is as high as N600.0/litre.

The question left unanswered is why these queues keep occurring in waves, with 2022 recording a staggering surge. The sole importer of PMS, the Nigerian National Petroleum Limited (NNPC) has given assurance on adequate availability of petrol for distribution. However, the issue lies in the fact that while NNPC imports petrol, private depots are responsible for lifting the products from the vessel to their depots for onward distribution to retailers. NNPC was previously responsible for the distribution, but vandalism of pipeline infrastructure has forced the company to halt distribution while relying on private depots to hire vessels to load the products from the “mother vessel” to their products. Hiring vessels and other associated logistics costs are mostly dollarized. Thus, the recent pressure on FX in the parallel market has made it more expensive for private depots to ship products to their depots, forcing them to raise their ex-depot price to between N188.0 – N200.0/litre, above the recommended pump price of N179.0/litre.

Given the foregoing, fuel retailers have been reluctant to buy PMS from the depots at the price level given the approved sale price limit. On the other hand, retailers who have gone ahead to buy the products now sell at c.N240.0/litre. Going forward, we believe the eventual “quick fix” will be another round of increase in retail price of PMS to N195.0 – N220.0/litre to allow retailers run at a profit. However, the lasting solution will be removal of subsidies and allowance of private participation in the importation of PMS.  

Show More

Related Articles

Leave a Reply

Back to top button