Despite Partial Border Closure, NNPC Failed To Reduce Fuel Import Volume—Report
Although the partial border closure enforced by Muhammadu Buhari in August 2019 caused a fall in the daily petrol consumption in the country, the Nigeria National Petroleum Corporation (NNPC) failed to bring down its import volume to rhyme with the reduced daily demand.
Looking at the corporation’s data on import/refining and distribution from September 2019 – the first full month of the closure until November 2020 – the pan ultimate month of its reversal, the firm imported 23.81bn liters of petrol and cashed in on just 19.08bn liters of the stock.
NNPC
Aside from the unknown amount it took from its arbitrarily established National Fuel Support Fund (NFSF), the firm said it claimed 222.18bn as ‘under recovery’ from importing this much for the country in seven months from September 2019 to March 2020. Compared to its monthly withholding of an estimated N120bn per month in 2021, these figures appear modest.
The drop in daily gasoline consumption stands in lonely company among the list of things that went right for the economy during the 16-month border closure. The president announced the partial closure to stem the smuggling of food into the country and petrol the other way.
His protectionist moves began to backfire in the same month it was announced. Naturally, all the price gains made by the country’s return to slow economic growth and a reduction in inflation started to pitter out, as the economy reacted to its new restrictions.
Partial border closure was not the only way the economy was held back, forex bans were extended to food importers in the face of low storage and insecurity. It was no surprise to observers when the National Bureau of Statistics (NBS) said headline inflation had risen from 11.02 per cent in August 2019 to 11.24 per cent in the first full month of the closure.
Throughout the period of the border closure, the prices of goods and services in the country never stopped ascending. Petrol should have been in that cart of commodities that were soaring above the paycheck of everyday Nigerians much earlier but the government tamped it down with a weight of over N200bn, until the COVID-19 pandemic struck.
Since the government was not willing to dissuade smuggling by allowing the price of petrol rise, observers felt the NNPC would have tried to take advantage of the government’s alternate option and cut down on the volume of fuel it refined with its Direct Sale Direct Purchase dealers. The corporation instead kept up the excess supply, despite the pandemic forcing the Organisation of Petroleum Exporting Countries (OPEC) to cut down Nigeria’s oil export output, reducing the corporation’s cash flow as a consequence.
In the 15 months during the partial boundary closure studied, the NNPC says it distributed 4.90bn liters of petrol less than it delivered in the 15 months before, inclusive of August, the month the land border restriction was announced. The firm sold 23.99bn liters between June 2018 and August 2019 but imported N24.64bn liters. The firm had no problem keeping out queues with an import excess of 649.64m liters, which is less than one month of consumption.
Why then did it find keeping a similar rate of excess between importation and distribution when daily consumption dropped?
“From what I hear, it is because the government wants to make sure there are no queues,” says Ayodele Oni, Partner at Bloomfield Law Practice. “This administration wants to be able to say that even if they didn’t get anything right, they prevented fuel queues from building up.”
At a monthly import average of 1.59bn liters, the corporation accumulated 2.98 months of excess during the 15 months of boundary restrictions. If we divided this extra of 4.73bn by the much lower distribution figure of 1.27bn, the accumulated petrol that wasn’t used comes to 3.72 months.
The entity should be hailed however, for bringing down the amount of money it withheld as under recovery before the bother closure was announced.
The firm held N855.39bn for importing 24.64bn liters of petrol – a monthly average of N57bn. It dropped this average to N31.74bn for importing 823.37m liters less. The reduction in ‘under recovery’ claims was most likely due to the drop in oil prices from its $80 highs at the end of 2018 to its $60/upper $50 bracket in 2019 anyways.
In any case, the volume of petrol distributed by the NNPC is several million liters higher than what eventually gets to the pump. The Department of Petroleum Resources (DPR) has been reporting in its national stock depot level updates that daily demand Is estimated at 38,200,000 since January 2020.
Holding this to be true from September 2019 to November 2020, the NNPC’s daily distribution figure of 41.84m for this period, is 3.64m more than the DPR’s estimation.
Observers feel if the NNPC must import any excess volumes, it should be regulated. “Right now, I don’t know any law that mandates the NNPC to import excess petrol,” Oni says. “It is just a political policy that gives room for fraudulence.”
Before the land borders were locked, NNPC’s says its daily distribution was 52.4m liters. The barring of goods from entering Nigeria across land, reduced the corporation’s distribution volume by over 10.6m, still it could only drop importation by 1.69m liters from the 15 months preceding the border closure.
The corporation new less than one month into the scheme that consumption levels had dropped, so why did it continue to import like it had other customers outside Nigeria?
“Significant drop in the PMS evacuation from fuel depots noted since August 22nd may be connected to border closure and other interventions of the security agencies aimed at curbing smuggling. We will contain smuggling of the PMS,” Group Managing Director of the firm, Mele Kyari said in a tweet on September 10, 2019.
The NNPC spokesperson, Kennie Obateru, has not responded to findings, promising on to seek response from the appropriate officials.
This story was produced under the NAREP oil and gas 2021 fellowship of the Premium Times Centre for Investigative Journalism.
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