LAGOS – Dauda Adekanbi drives one of the hundreds of yellow minibuses that weave through Lagos, Nigeria’s thrumming commercial capital.
Customers line up despite the coronavirus pandemic. But he has a different problem: rising petrol prices.
“Fuel is the only thing the government keep increasing,” the 50-year-old told Reuters on a busy Friday afternoon.
While Adekanbi is feeling the pinch, observers say government coffers are at risk, too.
Nigeria said in March that it had ended costly fuel subsidies, and announced in September it was no longer fixing pump prices. Since then, Lagos prices have risen to just over 160 naira per litre from 145.
But state oil company NNPC remains the country’s sole gasoline importer, and its group managing director, Mele Kyari, said that, if prices floated with no control, that could hurt consumers.
“Government is very keen on making sure that people are not exploited,” he told Reuters in an interview.
Four private importers, one former NNPC executive and a source close to the company said it was still setting gasoline prices – but at fuel depots rather than at the pump.
Those prices, set using an unpublished template, block private companies from importing, leaving the government as also the sole gasoline seller and opening it to continued losses.
NNPC’s Kyari insisted there was no allocation for fuel subsidies, elimination of which was among conditions for a $1.5 billion World Bank budget support loan. The Bank did not comment.
But Tunji Oyebanji, chairman of the Major Oil Marketers Association, said NNPC was losing at least 30 naira ($0.08) per litre on gasoline in early February, based on the international fuel price and the publicly available dollar exchange rate.
With daily consumption of roughly 40 million litres, that’s 1.2 billion naira ($3.15 million) per day, at a time when low oil prices have left Nigeria’s budget 5.60 trillion naira in deficit.
“The reality of it is that whether it’s subsidy, (whatever) you want to call it… it’s still happening,” Oyebanji told Reuters at his office in Apapa, the port where most fuel enters Nigeria.
Nigeria, Africa’s largest oil exporter, imports all its fuel, a sore point for its government.
Its 200 million citizens view cheap petrol as one of the few consistent benefits from a system where graft and inefficiency are ingrained.
Unions threatened strikes after price increases last year, and rumours of pump price rises of just a few naira sparked fuel queues and shortages across Lagos this week.
But subsidies cost some 10 trillion naira between 2006-2018 – more than the health, education or defence budgets.
NNPC’s Kyari said the current system was temporary, and the
government was working on a permanent mechanism to enable market-based prices, and private sector imports, while protecting consumers.
In the meantime, observers say the lack of transparency means consumers can’t know if they are getting a fair price – or budget watchdogs if the government is losing money.
“It has become more confusing,” said Bello Rabiu, a former NNPC chief operating officer and group executive director. “Any time there is no transparency, definitely there will be corruption.”
A copy of the unpublished template seen by Reuters does not outline what dollar exchange rate or international fuel price NNPC is using to set ex-depot prices.
A shortage of dollars at the Central Bank’s rate of 381 naira means it would take private importers six months to get enough official dollars for just one cargo of gasoline, Oyebanji said.
Tapping the more liquid parallel market, which according to AbokiFX has varied from 440 to 500 naira since September, would price private importers out.
Meanwhile, Oyebanji and others said, using government oil cargoes to exchange for fuel effectively provides subsidized currency.
Back in his yellow bus, Adekanbi is mulling his own solution: switching to a diesel engine. The fuel is not regulated, and more expensive.
But he says it lasts longer in his tank – and he doesn’t have to worry about shortages.
($1 = 381.0000 naira)