60m Litres Petrol Daily Consumption: NNPC’s Smuggling Swan Song

Dr. Maikanti Baru, group managing director of NNPC

 

 It is official. Nigeria now consumes over 60 million litres of petrol daily. That is nearly 100 percent increase from about 30million litres that the NNPC had listed as the country’s daily consumption before the onset of the economic recession. Curiously, however, there has been no discernible increase in the number of vehicles plying Nigeria’s roads.

According to the National Bureau of Statistics, Nigeria had about 11,547,236 motor vehicles as at the third quarter of 2017. About 4,656,725 of these vehicles are privately owned, 6,749,461 vehicles are registered as commercial vehicles while 135,216 are registered as government owned vehicles with 5,834 classified as belonging to the diplomatic community.

But to transportation experts and operators in the oil industry, the number of vehicles does not justify the consumption of 30million litres of petrol alone daily as the Nigerian National Petroleum Corporation had indicated on the eve of the recession. So, how can an overnight increase by 100 percent to 60 million litres daily be logical. Its not, of course, not even to Dr. Maikanti Baru, group managing director of NNPC under whose watch the rise in consumption was recorded.

The NNPC boss saw the increase in consumption as an “abnormal surge” and “in sharp contrast with established national consumption pattern.” Blaming “large scale smuggling for the “surge”, Baru explained that because of the obvious differential in petrol price between Nigeria and other neighbouring countries, it had become lucrative for the smugglers to use the frontier stations as a veritable conduit for the smuggling of products across the border, adding that this had resulted in a thriving market for Nigerian petrol in Niger Republic, Benin Republic, Cameroon, Chad and Togo, as well as Ghana, which has no direct borders with Nigeria.

But experts do not agree.

“Its totally illogical. Smuggling cannot explain the huge increase. Of course, smuggling has always being there, but there is no way it explains the sudden surge in consumption,” said a top expatriate staff of one of the major foreign oil companies operating in Nigeria. “By my reckoning, the earlier consumption rate of 30million litres was even too high for smugglers to account for a significant share of the figure. At 60 million, it just does not add up.

“I believe that the 60 million litres NNPC says is consumed daily in Nigeria alone is enough to serve the entire west Africa. But to do that, a huge logistic challenge will have to be overcome. Hundreds of oil tankers will be deployed daily to move the products out of Nigeria to the rest of the region,” the official who did not want to be named told Business and Maritime West Africa. “Its impossible for smugglers to do that.”

Watchers of the trend in accumulation of subsidy payments are convinced, however, that the sudden surge in consumption is following an established pattern.

“In the previous administration, there was a massive increase in subsidy claims by importers as the 2011 general elections drew close. As we suspected, a significant part of the claims were cooked up as the investigations undertaken by the Buhari administration showed. It’s the eve of another crucial election in 2019 and the same trend is emerging,” a top executive of an indigenous oil and gas company stated.

It is a subject not many people are not prepared to speak publicly on for fear of retributions. But that does not include Femi Falani, a Senior Advocate of Nigeria (SAN) and anti-corruption crusader.

In a letter to the Minister of State for Petroleum, Dr. Ibe Kachikwu where he said government’s claim on consumption is untenable, Falana sought access to official records on importation of refined products. He explained that the NNPC had in December 2017 put the nation’s daily consumption of petrol at 28 million litres.

He stated that the NNPC later announced in March this year that the daily consumption rate had climbed to 50 million litres, adding that a few weeks later, Kachikwu himself declared another figure of 60 million litres per day.

According to Falana, although the minister and the NNPC have explained that the rise in daily consumption of petrol is due to the smuggling of the commodity to neighbouring countries, the claim is still not tenable because of the low petrol consumption rate of the nations where the product is allegedly being smuggled to.

In his letter to the minister demanding access to records under the Freedom of Information Act, Falana stated that, “In December 2017, the management of the NNPC disclosed that the nation’s consumption rate of fuel was 28 million litres per day and that subsidy cost was N726 million per day, i.e., N261.4 billion per annum. But on March 5, 2018, the Group Managing Director of the NNPC, Dr. Maikanti Baru, claimed that the figure had metamorphosed  to 50 million litres per day and that the NNPC had spent $5.8 billion (N1.7 trillion) on fuel importation in January and February 2018.

“Furthermore, at a public forum held in Abuja, you (Kachikwu) stated that the consumption rate of fuel had skyrocketed to 60 million and that the cost of subsidy was N1.4 trillion! We are not unaware that the increasing consumption rate has been blamed on the smuggling of imported fuel from Nigeria to neighbouring countries by some economic saboteurs.

“Assuming without conceding that the story of smuggling is true, the total volume of fuel consumed by Benin, Togo, Cameroon, Niger, Chad and Ghana is said to be less than 250,000 litres per day. You will agree with me that this does not explain the difference of 32 million litres per day between the consumption rate of imported fuel in December 2017 and March 2018.”

Falana added, “With respect to the alleged subsidy on fuel importation, you failed to disclose the amount realised from the sale of the 60 million litres at N145 per litre. You have also conveniently failed to account for the sale of the 445,000 barrels of crude oil allocated to the NNPC daily by the Federal Government.

“The convenient defence of smuggling as cheap justification for a gap of 32 million litres a day (at N145 per litre amounting N4.6 billion daily) is untenable given the billions of naira continually expended on Project Aquila Software by the Petroleum Equalisation Fund, a parastatal under your watch in the petroleum ministry, to track every litre of petroleum product evacuated from the depots and sold at retail stations in the country.”

Indeed, the entire transactions on fuel importation have been shrouded in secrecy that has characterised the oil behemoth’s operations over the years. True to expectations, NNPC refused to allow Falana access to official records on importation of refined products.

“It is a body established by law to manage the commercial interests of Nigeria in the oil and gas sector of the economy and conduct trade therein.

“It cannot, therefore, by any stretch of imagination be brought within the definition of Public Institution under the Act,” the NNPC claimed in its response to Falana.

Another official of an oil and gas company wondered how it was logistically feasible to handle 60 million litres of petrol daily. “We do not have the capacity to handle 60 million litres of petrol daily. All the tank farms combined cannot process that amount of fuel daily. Where are they stored? Where are the records on distribution?” he queried.

According to him, it is the politics of 2019 elections that is at play. “It is unfortunate, but its all about preparing for the 2019 elections. They are cooking the figures to raise as much money as possible for the election. There is no other logical explanation,” the official stated, insisting that he must remain anonymous.

He agreed that it is impossible for smugglers to be able to move millions of products daily out of the country. “Smuggling has always been with us and will in all probability remain intractable. But it cannot get to the extent where smuggling can account for up to 30 million litres of petrol daily. Its impossible,” he said.

In its uncanny style of managing the sourcing and distribution of refined imported products, NNPC had curiously insisted on calling the subsidy it pays on the price differential as “under-recovery”. At the time it claimed to be paying N774 million daily as subsidy, the landing cost of petrol was N171 per litre. This has, however, been surpassed as the price of crude oil has been on the upswing in the international market, now hovering around $75 - $80 per barrel.  

Speaking on the manner NNPC is being run under Baru, the Emir of Kano and one-time governor of the Central Bank, Muhammadu Sanusi (II), said no law or regulation had been put in place to change how things were being done in the corporation.

“I have not seen a change in laws or regulations that will institutionalise any changes. It is far more important to put in place the institutional changes that make it impossible for things to be done.”

He insisted that the payment of subsidy on petroleum products must be scrapped immediately, adding that the problem of NNPC was beyond the change of its leadership.

“It is not about the persons in the NNPC but about whether anyone can make a system operate honestly when there are such huge arbitrage opportunities. We need to import angels for that to happen,” the emir said.

As a former CBN governor, the emir’s knowledge of opaque financial and material accounting system in NNPC cannot be faulted. Therefore, Baru and Kachichukwu’s doubtful tales of smuggling can at best be taken as a swan song.

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