High prices, long queues and black-market boom amid fuel supply chain disruptions

Despite being one of the largest oil producers in Africa, Nigeria continues to grapple with recurrent fuel supply crises. The recent wave of petrol scarcity has hit Lagos, the Federal Capital Territory (FCT), and surrounding states, with petrol prices surging up to N900 per litre in some areas. This has led to extensive queues at filling stations, significant gridlocks, and a thriving black market where petrol is sold at exorbitant prices.

The Nigerian National Petroleum Company Limited (NNPCL) attributes the latest fuel scarcity to adverse weather conditions, including thunderstorms and lightning, disrupting ship-to-ship transfers and the overall supply chain. These weather events have affected berthing at jetties, truck load-outs, and transportation of products to filling stations, resulting in significant delays.

Flooded truck routes further compounded the logistics challenges, impeding the movement of petrol from coastal regions to inland areas, particularly Abuja.

Nigeria’s over 5,200 kilometers of pipelines are largely decrepit due to old age and frequent vandalism, forcing reliance on road transport for fuel distribution. This method is not only inefficient but also significantly raises the cost of petrol by the time it reaches consumers.

Poor road conditions have further exacerbated transportation difficulties, especially during the rainy season when roads become nearly impassable.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) has pointed out that the sole importation of petrol by NNPCL and the high ex-depot prices from private depots are major factors in the scarcity. Private depot owners have increased the ex-depot price of petrol from N630 to N720 per litre, making it difficult for independent marketers to procure and sell the product at reasonable prices.

The high costs imposed by private depot owners, combined with transportation and other operational expenses, lead to inflated retail prices that are unaffordable for many Nigerians, prompting some stations to shut down due to an inability to sell at competitive rates.

Economic Strain:

The skyrocketing fuel prices have a ripple effect on the broader economy, increasing the cost of goods and services. Transportation costs for both goods and commuters have surged, leading to higher prices across the board and eroding purchasing power.

Small businesses and informal sector workers, who rely heavily on affordable petrol for their operations, face severe challenges, potentially leading to reduced economic activity and higher unemployment rates.

Social Disruption:

Long queues at filling stations have caused significant disruption to daily life, with people spending hours, sometimes overnight, just to obtain petrol. This not only wastes productive hours but also causes physical and mental stress.

The thriving black market for fuel, where petrol is sold at inflated prices, highlights the desperation and the extent of the crisis. It also raises concerns about safety, as unregulated fuel sales can lead to accidents and further complicate the crisis.

Government and Stakeholder Responses

The NNPCL has acknowledged the logistical challenges and is working to resolve them by coordinating with relevant stakeholders. Efforts include clearing backlogs and resuming loading operations in areas where weather conditions have improved. The company has urged the public to avoid panic buying and hoarding, emphasizing that such behaviors exacerbate the situation.

IPMAN has called for greater transparency from NNPCL regarding the root causes of the supply issues and has highlighted the need for direct procurement from major suppliers like the Dangote refinery. This could potentially bypass the middlemen, reducing costs and stabilizing supply.

Future Prospects:

Ongoing negotiations with major suppliers like the Dangote refinery aim to establish a more direct and cost-effective supply chain. This could mitigate some of the price hikes and ensure a steadier supply of petrol.

Long-term solutions must address infrastructural deficits, including the rehabilitation of pipelines and improvement of road networks to facilitate smoother and more efficient distribution of petroleum products.

Conclusion

The persisting fuel supply hiccups in Nigeria are a multifaceted issue stemming from logistical disruptions, infrastructural challenges, and market dynamics. While immediate relief efforts focus on resolving logistical bottlenecks and negotiating better supply terms, a comprehensive and sustainable solution will require significant investment in infrastructure and a more diversified and resilient supply chain. Ensuring transparency, enhancing infrastructural capabilities, and fostering competitive market practices are crucial to preventing future crises and stabilizing Nigeria’s fuel supply.