Dr. Joseph Obele is the Chairman of Independent Petroleum Marketers Association of Nigeria (IPMAN) in Rivers State. In this interview with EMMANUEL OBE, he asserts that there’s an international racket feeding fat on fuel subsidy in Nigeria.
Can you tell us what is happening with regard to the fears you just expressed about an impending scarcity of petrol in Nigeria?
About 40 days ago, we, the critical stakeholders in the industry noticed via the supply chain that there is a drop in quantity of trucks supplied to marketers. In view of this, I requested for an appointment with the MD, NNPC Retail, the defunct PPMC (Pipelines and Petroleum Marketing Company Limited). PPMC has been replaced arising from the PIA (Petroleum Industry Act) with what we call NNPC Retail Limited. He graciously granted me the appointment. So, IPMAN, Port Harcourt depot attended the meeting at his office, Asokoro Abuja with a team of 11 persons – all my executives and elders of Port Harcourt depot. The meeting was presided over by the MD, NNPC Limited, Mr. Stockman, a foreigner.
What did you discuss at the meeting?
In the meeting we discussed several things. One of such was the drop in supply because it is obvious that where about 50 trucks have been supplied to marketers in a month, for now they don’t do up to five or four. While in Abuja, I discovered serious queues at filling stations. Queues are building up in Abuja, Lagos and northern parts of Nigeria.
So, we tried to confirm from him why it was so. He put it to us that they had limited stock available; that there was a serious challenge at hand that they don’t have post available be it in the tank farms or vessels and the rest. This implies that if nothing is done about it, in no distant time, scarcity will gradually build up. At the moment, the MD also confirmed that PPMC had stock in two private depots in Rivers State. So the residents of Rivers State have no reason to embark on panic buying as there is sufficient stock in Rivers State at the moment.
We went further after our meeting with the MD to make some investigation on the core reason for this perceived scarcity. It was revealed to us that during the electioneering process, the President-elect (Bola Tinubu) in one of his campaign speeches, stated, I’m quoting him that “this scarcity you are talking about I am going to remove it. No matter how you people protest, I am going to remove it.” And he has never minced his words; he is so confident about it and he is so sure that he is going to remove it. That statement poses a serious threat to the investors that are concerned about the value aspect of the supply chain in the importation of refined products. These set of investors are waiting for him (President-elect) to rephrase his statement because nobody wants to invest in uncertain business. So, that threat has made these investors to henceforth stop importation since two, three weeks ago. You are not sure if when he comes into office he will pay for the subsidy. Subsidy is the differential, the monetary intervention of government.
As we speak today we are importing from the international market. And the landing cost today as the NNPC Retail Limited hinted was close to N400 per litre. So, government insisting that they should sell this product to Nigerians at N190 per litre it implies that government is paying close to N210 per any litre of fuel consumed by citizens of Nigeria.
Now, Tinubu has said this monetary intervention, he will not do it. So, the importer or the marketer that will use his N400 to import the product is not sure that the differential will be paid by the government hence they are slow about further importation or they have suspended importation. This implies that scarcity is building up gradually and if nothing is done about it, it will show further.
You mean it has nothing to do with the concerns expressed by the National Economic council about the programmed withdrawal of subsidy that may come to an end in June?
The 2022 Budget had about N6.7 trillion for fuel subsidy payment. For this year, the budget has a mid-2023 provided for N3.6 trillion and at that, Nigeria will be out of subsidy regime by 1st of July.
Recall that inflation in Nigeria right now is about 22.4 percent. And every commodity in Nigeria revolves around this commodity called PMS (fuel). So, if subsidy is removed, we have projected that Nigeria will buy fuel at N750 per litre and with inflation in Nigeria the cost of every commodity in the market will skyrocket by 400 percent. So, it will be untold hardship that will be meted upon our people if subsidy is eventually removed by 1st of July.
So, in the meeting of National Economic Council, they advised Mr. President that hence it is a few days for him to leave office, he should slow action and wait for the incoming President to take every critical decision that has to do with removal of fuel subsidy. Recall that the incoming President is going to inherit some challenges, one of which is a debt of N44 trillion and the challenge posed by Nigerian workers: PENGASSAN and IPMAN saying government should not remove fuel subsidy and the president-elect has said he is going to remove fuel subsidy.
So, it’s a serious challenge that is awaiting the President-elect in his first few days in office. NUPENG, PENGASSAN, Nigeria Labour Congress and all stakeholders have posited that yes, fuel subsidy is a serious burden to the economy of the nation. But the issue is the time factor. And we have submitted that it should be removed when our refineries are functioning at optimal or average capacity then it can be removed. Going ahead to remove it right now will lead to a conflict between him and the stakeholders that have advised that subsidy shouldn’t be removed at the moment.
But perceiving the mindset of the President-elect, I can say he won’t give a day further for subsidy regime because out of the N44 trillion debt burden of Nigeria, subsidy got over 75 percent of that total debt. So, why would you want to bring further debt on your head? Multiply N210 per litre by the average volume consumed in Nigeria, which is 70 million litres per day. That is to tell you how much we are paying. Subsidy is a waste. Yes, it should be removed but it should be removed when Nigerian refineries are functioning so that Nigerians would buy fuel less than N100 per litre. Anything outside that when we keep importing from international market, I bet that Nigerians will buy fuel N750 per litre.
You tried to say that the rehabilitation of the refineries is a precondition for government to remove subsidy on fuel . Is it possible that the refineries can become productive very soon?
The executives of IPMAN under my leadership went to the rehabilitation site for an oversight during the week and we discovered that a lot of contractors are pulling out of site and I asked them why. They said they were yet to be paid. And by proxy, I am a member of the host community and it will interest you to know that they are retrenching. They are sacking members of the host communities when the plant is yet to commence operation, when they are yet to commission the plant. I think they are not committed to seeing the refinery functional and operational. The work is going on at a slow pace. It is very slow. They are not committed to it. It’s a big racket importing from the international market. If they are committed to ending the international business, then the refineries will be functional. So, I can put it to you that they are not really committed to seeing Nigerian refineries functional. The pace of work there is not really encouraging from oversight functions.
We hear that Dangote Refinery that has the capacity to process 650,000 barrels per day is going to come up soon, maybe at the end of this month or next month. Isn’t that going to provide some relief for the situation in which we have found ourselves?
The MD, the Chairman, the CEO of Dangote Refinery (Aliko Dangote) in one of his broadcasts said he was going to sell his products at a global competitive rate. That is whatever PMS is selling in the international market, that is the rate that will be reflecting here in Nigeria, that he is not a charity organization.
Like I told you that in the international market, the cost of importation, plus or minus, is close to N400 as of today. That is the rate we will see Dangote selling also. So, the benefit Nigerians will derive when the refinery commences is product availability. The era of consistent scarcity and the rest will be a thing of the past. But price and making it affordable, we cannot assure Nigerians of that. But products availability? Yes. The product will be available. There will be surplus of products in Nigeria and that issue of once in a while scarcity will be a thing of the past. But for the price to be affordable for the citizens of Nigeria, that is not possible because he is going to buy his crude oil at international rate and sell the refined product at international rate. That is why they are pushing that subsidy should be removed.
Recall also that about 17 investors have been given licence for modular refineries and many more. But they said the terrain is not business friendly for them to put variable cost, associate, overhead cost to get their cost of production and you will now determine what a businessman should sell his product. They it’s not done anywhere on earth, said that we should allow economic functions of demand and supply set the price. So, the regime of subsidy is a serious barrier to the economy of Nigeria. It has negative impact on the economy of Nigeria because we will not see business boom in the oil and gas industry, mostly downstream sector, mainstream and upstream when subsidy is still active. But whenever subsidy is removed, I put it to you that we will see serious boom. We will see serious investors, foreign investors, local investors putting.
We actually support that subsidy should be removed but the issue is that of time. And the time is when our refineries are functional. That is when subsidies should be removed.
Still on the Dangote refinery. Now, we are subsidising products, not the crude oil. Don’t you see a situation where Nigerian government can subsidise crude oil supply to Dangote refinery so that they are not purchasing crude oil at international price, since crude oil can be sourced locally?
An article published by Dangote had it that the price of Nigerian crude oil is not the best globally. And Dangote is building a pipeline from the Niger Delta to Lagos where he has the facility. That implies that through pipelines they will be pumping. Outside pipelines, Dangote is prepared for the challenges ahead in the future should anything happen to the pipelines. Hence he has built a crude oil terminal by jetty. He will not get supply from Nigeria through the jetty. A businessman that is proactive, building a crude oil terminal that is to tell you that he is ready to import from any country where he has the best comparative price for him. So, he is coming for a global business. He has stated that his PMS will sell at international competitive rate. So, whatever it is selling in America, whatever it is selling in England, that is the rate Dangote will be selling here. So, he is not even relying on Nigeria crude oil. That is why he is building the biggest crude oil terminal where he will be importing and storing. And there is a pipeline running from Escravos, Warri straight to Lagos. It is one of the biggest pipelines in Nigeria, outside the one that they are constructing to Katsina State where we have the Katsina State refinery.
It has been an issue to most of us. How could it be that we have four refineries that are dormant and the outgoing president in his state they are constructing a new refinery of 100,000 production capacity per day running a pipeline worth billions of dollars from Warri down to that place? Then the pipeline is connected also from Chad Republic to that same refinery. That is to say that if the Niger Delta trunk line disappoints them by any break of the pipeline the supply from Chad will be supplying the Katsina refinery.
Likewise what Dangote has done too. There is a pipeline supplying crude to the facility. There is also a jetty terminal supplying crude to the facility. He is really proactive.
As an insider, what really is the problem with the refineries? We thought there was a guaranteed $1.5 billion funding facility for the rehabilitation of the Port Harcourt refinery. Now you are talking about contractors not being paid and all that. Is it that that funding source is not being accessed? What is happening?
The funding model of Port Refinery rehabilitation was in two dimensions with a total cost of $1.5 billion. The Africa Export and Import Bank (AFREXIM) was to provide $1 billion and the government of Nigeria was to provide the half of it, $500 million. From information available, one of the parties has fulfilled its counterpart funding and one is yet to do. The information is not in the public domain. So, we have on record that one of the partners has done its part and the other is yet to do. A job that has not gone 30/70 percent completion, they are retrenching and sacking people. They are reducing staff strength every day. Contractors on site are pulling out that they are yet to pay them. I think it’s a terrible state and it’s just because they are not committed in seeing the refineries functional.
As a critical stakeholder in the oil and gas sector, what would you advise the President-elect to do in that sector?
I would advise the President-elect to rephrase that statement immediately, even before his inauguration. That statement in which he said he was going to remove subsidy no matter how you protest. He should rephrase it because he is yet to take office and investors that usually pump in billions of dollars for importation are already slowing that and holding back their funds because of his threat. So, that threat is on record that subsidy is coming, dying gradually. So, I advise him to rephrase that statement in no distant time.
Secondly, as he takes office, he shouldn’t be in a hurry to remove fuel subsidy. He should continue while he charges up the rehabilitation of the ongoing Port Harcourt refinery, the Warri refinery and I think they have commenced the Kaduna refinery recently. But the Port Harcourt refinery has been on since the past two years, and there is nothing to show for it till date. The minister of state for Petroleum has just resigned, our brother from Bayelsa, Timpre Sylva. Sylva had stated that the refinery would commence operation by December 2022. He failed and he then said first quarter of this year, 2023. I had told him at a press conference that he was going to fail also. He then said second quarter of 2023. How many days are remaining for us to end the second quarter? Just by June ending, we will be done. I told him also. So he had promised three times and he had failed. We wish him well as he is going to contest for the Bayelsa State governorship if promising people and failing is a yardstick or criterion for getting people, Bayelsa should decide in that direction.
Let’s look at investments in this part of the country. The road that leads to a major ports complex is bad, even the big industries that actually support the economy in the Niger Delta and the East. Do you think there is some politics behind the not fixing the East-West road so that the economy of this region would be kept down, whereas we hear of massive investments in infrastructure in Lagos, the West and even in the north? The people have cried for the road to be fixed for years. The road was moved from the Ministry of Niger Delta Affairs to the Ministry of Works, from there it was moved to NNPC Limited yet nothing is working.
The investors and manufacturers over here basically dwell on this widely circulated diesel called Kpofire. Kerosene is also very difficult to see here in the Niger Delta. The reason is because the refineries are not functioning.
When this refinery commences here in Alesa, Eleme, the traffic we see; the pressure that will be on the road deplorable road as it is will be so much; with the threat it will pose. Thousands of trucks in the whole Nigeria and neighbouring countries would be heading towards the refinery that they will see with flame producing kerosene, producing diesel. They will come because people are tired of this Kpofire. So, the state of this Eleme road, the people of the Niger Delta are very much disappointed in our brother, Godswill Akpabio that was the minister of Niger Delta Affairs. Under him, the Niger Delta Development Commission was under him and he was unable … I recall when the youths of Eleme did a protest locking down the refinery junction and the whole East-West Road. Godswill Akpabio left his office in Abuja and he came. He said please, open up the road that we will start construction immediately. I was here that day. Akapbio did ojoro to the people of Eleme and Okrika and the whole Ogoni youths that did the protest. We were there and we saw three, four equipment and we hailed him and we clapped for him, we celebrated him and gave him ovations and we left. We didn’t know that that very night we left, those machines left too till date. He said, “Leave the road, we will commence construction immediately.” And we said “No. We want to see machines before we leave.”
Maybe, that’s the mistake we made. We said we wanted to see machines before we leave the road. We should have said we want to see job commence before we leaving the road. So, Akpabio gave us what we wanted. We said until we see machines we would not leave. So from afar we saw the headlights of the machines coming. And we opened up the road for construction to commence. We didn’t know that that very night, the machines went back. And the boys had gone back to their homes after opening the road.
So, we are saying that we are disappointed in Godswill Akapbio for his inability for the many years that he was in office as the minister to fix this very East-West road. And here is the Port Harcourt refinery that will commence operation in no distant time and we have privileged information that the full commercialisation of Onne Port will commence also in no distant time. The pressure on this road will be a big threat, a very big risk to facilities and the people of this area. If one truck tumble and goes up in flames I think it will kill people and destroy property. We don’t pray for that. That is why we are calling on the President-elect as he tales offices that one of the most critical roads in the country, this Eleme East-West road, he should do everything to ensure that he fixes the road that Akpabio was unable to fix. Niger Delta people are disappointed in Godswill Akpabio.