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Nigerians favoured?
At the recent re- commissioning of the abandoned Ore petroleum depot in Nigeria's southwest state of Ondo, the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Engr. Funsho Kupolokun, washed his organization's hands off blame on the persistent high cost of petroleum products across the country quite beyond the indices set after full deregulation. He was reacting to a question as to why, contrary to President Obansanjo's promise of stability in prices for the next two years, at least, diesel or Automated Gas Oil (AGO) sells as high as N90 per litre as against the N67 official rate. Premium Motor Spirit otherwise called petrol, costs N75 or more a litre, depending on which part of the country whereas the official price is N65 per litre. On its own, Dual Purpose Kerozene (DPK or kerosene) has hopped from the government rate of N54 to between N80 and N100 per litre and in the second week of September, parts of Lagos witnessed unprecedented scarcity of this vital product leading to a sales margin of between N110 and N120 per litre, a situation that has persisted ever since! And the masses have remained the worst for it. At the inception of the last quarter in 2006 also, reports from Jos, capital of Nigeria's central state of Plateau, also said the rate of scarcity of petroleum products was becoming embarrassing, a development NNPC quickly attributed to what it termed black marketing and vandalisation of product pipelines. In a recent statement, the Petroleum Products Prizes Regulatory Agency (PPPRA) harped on the agency's resolve to completely eliminate scarcity of petroleum products and bring the gains of liberalization to Nigerians and stakeholders in the downstream sector. By this, the impression is that as long as long queues no longer feature at petrol stations and scarcity is kept at bay, all problems persisting in the sector have been substantially solved. But what about the prohibitive and varied cost of these products, especially kerosene, in different parts of the country? Can't a reasonable stability and uniformity be maintained in pump prices in line with government directive?
NNPC's stance appears in tandem with views making the rounds already that over time, she has learnt to pass the buck even when it is unnecessary. Some industry watchers say NNPC, sometimes, behaves more like the proverbial drummer in the woods who occasionally runs out in the open to shout in condemnation of whoever is drumming and causing unwanted noise all over the place. But the question remains: is she fair to pass blames, realizing that as a body, she is vested with the responsibility of ensuring sanity in the sector? If NNPC, in collaboration with other agencies such as the PPPRA, possesses the statutory powers to regulate what other stakeholders in the downstream sector do including controlling indiscriminating increases in pump prices, industry watchers say, then Kupolokun's claim reveals a palpable failure on her part to perform to public expectation. More explanation is therefore imperative, if anything, to assuage growing anxiety and sufferings of the largely uniformed masses of Nigeria to whom the technicalities of oil exploration, refinery, distribution and price-fixing make no meaning. A survey indicates that of all by-products of crude oil, kerosene is the most strategically relevant to the comfort and convenience of Nigeria's vast majority of poor people. Over time, while remaining largely affordable, kerosene has come to occupy an enviable place in the domestic arena as an alternative source of energy, especially for cooking. Similarly, artisans such as blacksmiths, welders and others engaged in various iron works utilize kerosene to power their furnaces. Nigeria produces cooking gas but owing to the prohibitive cost, its use for cooking and allied chores has remained an exclusive preserve of only the rich and well to do. Kerosene, as a strategic by-product of petroleum, had remained relatively cheap and affordable until the authorities came up with the removal of subsidy on finished petroleum products as a component of the current economic reform programme. As explained recently by the PPPRA, kerosene, a by-product of crude oil, is expensive owing to its high demand in the aviation sector where it is said to serve a strategic function as a component of aviation fuel. Kerosine is also said to be heavily subsidized presently by the federal government.
According to environmental experts, Nigeria has been at the vanguard of the global war against desertification and deforestation. From her vast northern flank, for instance, the Sahara desert has continued to encroach southwards, devastating expansive stretches of arable land while at the same time, threatening human settlements. In the south, similarly, depletion of the rich rain forests and the destruction of the flora and fauna have continued to be a problem. In the traditional search for firewood, people have gone all-out to fell trees and tamper with the vegetation. Many hack down majestic trees in the rain forest in the quest for timber used for diverse purposes. The consequences? The areas get dangerously exposed to the very heavy tropical rains, which readily create deep gullies and wash away the vast lands leading to dreadful erosion sites that litter the southern areas today. Anambra state is a typical example.
In a situation the authorities map out huge funds to contain the twin environmental hazards of desertification and deforestation, what then becomes the role of kerosene? The pump price of kerosene must therefore be brought down in compliance with a subsisting presidential directive, many concerned citizens say. "It should be cheap and affordable as one way of discouraging the common people from using firewood for cooking and other domestic and semi-industrial purposes,'' volunteered Iyabo Bello, a Lagos housewife and retailer of kerosene for twenty years in Nigeria's former capital city.
The independent petroleum marketers?
An independent petroleum products marketer and CEO, Memphis Metropolitan Energy Ltd, Bernard Sowho, makes it clear that NNPC cannot continue to play what he calls hide-and-seek on the issue of instability in the prices of petroleum products. Sowho contended that to the ordinary Nigerian, the technological intricacies involved in the production of petroleum products (especially kerosene) remains a non-issue. Even whether or not the refineries are working and at what capacity make no meaning. What matters to the ordinary Nigerian is that his country produces and exports crude oil- a natural resource out of which kerosene is a derivative. And since the refineries in Port Harcourt, Warri and Kaduna are in Nigeria, there is no reason he (the common man) cannot have this product in abundance and at a rate he can readily afford because a man who lives in water, a local proverb says, can never wash his hands with spittle.
In an exclusive interview with D&E, Sowho, a German-trained economist and international businessman, insists that as a regulatory body, NNPC must find a lasting solution to indiscriminate increases in pump prices and black marketing if her existence must make a meaning to the ordinary Nigerian.
It appears today, the common Nigerian who should enjoy the end products of petroleum in his country reputed for abundance of this resource has continued to groan in complaints. Do you share this view?
When we talk about the downstream sector, we talk about finished products such as AGO, petrol, FPFO and kerosene which are products that the common people use eventually either as fuel for cooking or for any other purposes. But unfortunately today, these products are so expensive especially because the price of crude oil in the international market has gone up and since crude oil is the main raw material for the production of theses products, automatically, the prices of these products go up. You find that the refineries we have are all foreign-built. We don't have the capacity, we don't have the know-how, and we don't have the technology to have these things built. These things have cost the government so much money. Because the cost of crude oil has a gone up, the cost of refined petroleum products have also gone up and the purchasing power of the people is not enough to meet up the purchase of petrol, kerosene, etc, the people tend to complain so much. You find that before (President) Obasanjo came in, the cost of petrol was very minimal. Obasanjo is the first leader we have in this country who took the prices of petroleum products almost a 100% up which affected the economy terribly. The increase in our purchasing power was wrongly handled right from Babagida's time (as Nigeria's President). If at the time they were deregulating or devaluing the currency they increased salaries, minimal at that time, we won't be crying much today. People are crying because of these things. Also because other means of livelihood in these areas where petroleum is being taken have been destroyed particularly in the riverine areas where they do fishing, the farmers' farms have been destroyed through pollution; the rivers have been polluted.
People can no longer farm, they can no longer fish. Their earning power is further being affected: they can no longer buy, salaries are low, the people are crying, asking the government to reduce the cost of these products. The government is saying no, they cannot. But recent discussions are being heard that the excess crude oil money that we have today can be used to cushion the cost of petroleum products. The government has not acceded to that yet. You are also a witness to the fact that we received 18billion dollar debt forgiveness this year. The money didn't just come like that. The consultants used to do this job earned some good money which the government has not told us how much till today. If, for instance, the government decides to utilize the excess crude oil earnings to reduce the cost of petroleum products, that will help the common man a long way. But until that is done, we will continue to buy petroleum products at very high prices.
The federal government has, on a number of occasions, promised to reduce the cost of kerosene, which is one product that has a lot to do with the common people. But up till today, these pronouncements have not been translated into reality.
Unfortunately, we have a lot of government officials that are businessmen. And because some of them have refineries built outside this country, they rather go out to import from those refineries. If the same government now wakes up to say they want to bring down the cost of kerosene for the common man, this group of people will not agree. Products that are bought from their own refineries abroad in South Africa and some other countries of the world are expensive and buying there and coming to sell cheap here means a loss to either the refinery owners or the government here. The government is crying that the international price has gone up tremendously. So, it will be difficult for them to bear the burden alone and that is why they are turning part of the costs on the common man. We have cried severally that the cost of kerosene should be brought down. The question is: can we bring down the cost of kerosene alone, leaving petrol and AGO? If that is done, how is the government going to let it done? Do they have the indices and the will power to get it done? Are they ready in themselves to get it done? From the experience we've had, it appears Nigeria has never had a government. Nobody cares about the common man. All they are after is how they can fill their pockets. Nobody wants to think: let us help the man on the street; let us reduce the cost of kerosene. We cry everyday. To solve this problem, our refineries- we have one in Kaduna, two in Port Harcourt and one in Warri-these are producing below 30% capacity. They are, in fact, not producing. If they were to be in production at the level they ought to be, the cost of most of these products will go down. But again, the government has not been able to tell us the foreign input, the cost (of refining) per barrel/litre of kerosene, petrol or AGO. What do they put in? They've not been able to tell us what it costs. They have been shying away from it. The papers have cried, people have cried: tell us, how much do you put to produce a litre of petrol, kerosene or AGO? Nobody has been able to tell us. Maybe they don't know how much it is, maybe they know. But they are shying away from it because if they come forth to say it, we are going to ask if this is the cost, why are you selling kerosene so high? So, they will be able to tell us! Officially we're told Warri is not working but production is going on there underground. This is being done because they want the Lagos area to be busy and, like you and I know, Lagos does not produce petroleum products. It is only an outlet where these products are being sold. And if, for instance, Warri is left to produce at full capacity, Port Harcourt is left to produce at full capacity, people coming from Niger, Chad and the northern parts of Nigeria, instead of coming to Lagos to buy, rather go to Port Harcourt and Warri which are nearer to them to purchase the products and go back to where they are. But we heard that the authorities intentionally told Warri and Port Harcourt to shut down and to produce at minimal capacity to allow Lagos to be busy; to allow importation to come in and this importation mainly, when they come, they are all pumped through Lagos. So people could rush down to Lagos, buy their products and go. If Port Harcourt, Warri and other refineries are left to produce at a reasonable capacity, surely we are going to have enough products to buy in this country and will also have enough to export.
And, perhaps, the practice of ferrying the refined products from abroad into Nigeria will now become economically unviable…
If our refineries are left to produce at a reasonable capacity, importation, for sure, will be reduced and those government officials responsible for the importation of these products will no longer make all that huge money they make and stash somewhere. This is a problem we are facing in this country that we need to address it properly. We have the capacity to produce; we have the raw material (the crude oil); we feed other refineries with crude oil, we cannot feed our own. Our refineries are good. They only need to be serviced and maintained for them to remain, but the government is shying away from maintaining these refineries or they will not do them as when due. This is the problem we are facing.
There have been several cases of people unknowingly buying adulterated products, especially kerosene, and getting burnt at home. We also know that petroleum product pipelines get vandalized all over the country. The security agencies appear not to be doing much especially when there are allegations of collusion with the hoodlums to continue with the nefarious act. For how long do you think this should continue?
What has been responsible for the explosion of lanterns and stoves at homes is that the nation has mainly one line of pipelines for the services of AGO, kerosene and petrol. When, for instance, a refinery produces AGO, it runs through the same pipelines to where it is stored. When the AGO finishes, the refinery blocks it and runs petrol through the same line. When what they produce is finished, they run kerosene though the same pipeline. You find that kerosene and petrol do not agree. If you mix kerosene and petrol, it causes explosion when it comes in contact with light. Most of these kerosene explosions in homes give people very serious burns. You find that petrol was run through the pipe lines and without having to wash it properly with AGO before pumping the other product, they probably ran petrol and afterwards out of mistake or intension, they ran kerosene through the same pipeline which made both of them to mix. When they mix, the innocent citizen goes to the market to buy this product. The NNPC is not entirely responsible for this because I know, as at the time they pump petrol, there are intervals. When they break that, they wait for some time, flush it before they run kerosene or any other product. But the vandals are a problem in this place. When you are running petrol, they go there, burst or put holes into some of these pipelines and siphon petrol. And because they don't know when kerosene is going to pass, you find that when they are taking petrol, all of a sudden kerosene comes, they put all of them together and carry same to sell in the market. So, kerosene and petrol have mixed but because now they probably have more kerosene in the product than petrol, they sell it as kerosene. If the innocent ones buy these products and use in their stoves, there is explosion. Coming to the area of vandalisation of pipeline, one, we should consider when these pipes were laid. These pipes have been there many years back. You find that some of them need changing. New pipes need to be laid nationwide. But this is not being done. We cannot blame vandals for all the leakages we have in the society. Some of these things are as a result of old age (of the pipes). The pipelines, when they are old, get burst on their own either through rust or some other effect. The harsh economy has, on its own, made it imperative for hoodlums to break these pipelines as a means of survival. I want to tell you this: I don't think Nigerians are bad as such. Bad governance has led them into acts of survival using negative instinct. The Nigeria man wants to survive. You cannot sit in your home, you see that pipeline running by you and you see somebody in office making so much money from it while you are hungry and that thing is there. The next thing you think of is, let me break that think, take out of it, sell and be alive! That is why they go there to break these pipelines. You find that the federal government is aware of all these things. That is the reason they have lined up security agents to watch over these pipelines. But unfortunately, these security agents themselves now connive with the hoodlums to break the pipelines. I don't know if you read recently of some policemen that were arrested in connection with this kind of act. Some of them that connive with hoodlums stand by and tell them where to go and knock, where to break, how to fix these things. Some of them even bring their own bunkers, to come and take products from this place. I think the government should help to alleviate the sufferings of the security agents themselves. Some of the policemen, themselves, earn N7, 000 a month. What will N7, 000 do them? It will do them nothing. So, when these policemen see these vandals going to break pipelines, they themselves believe they too can make so much money from these breakages and they join them to steal!
When a security man that is supposed to watch over pipelines sees a vandal that breaks a pipeline making millions of Naira, what do you think on earth will stop him from aiding this hoodlum when he knows that from the activities, he himself can make some huge money? So, these are the things that entice some security men into conniving with the vandals. I want to advise the federal government to see what can be done to improve the living standard of the policemen. Give them insurance; provide good living accommodation for them. If you go to the barracks today, you will pity the policemen. They live in deplorable conditions. Even to drive in or walk in, you have to select where to put your feet so that you don't step on green areas of the road. You find stones all over the place. Their homes are a sorry sight. The government should do something about this. They are on their own saying that the standard of the policemen is very low. They want to improve on their salaries and work tools. It's all just lip service. They have not done anything. We pray and ask the federal government to do something.
What do you think is the practical thing government must do to discourage vandals from breaking pipelines?
Government should try and create job opportunities for these people especially in the Niger Delta and other areas the pipelines traverse. If you look at the oil companies today, instead of employing the locals from the place, they rather employ people from other parts of the country. People from other areas get jobs while the natives have no jobs for themselves. You also find that the quarters of these expatriates, you look just a pole away and see paradise, well constructed and lit-up areas whereas just a stone's throw, natives scoop water from the ground to cook, drink and take their bath. The government should try and improve the living condition in these areas; create means of livelihood for them particularly as their occupation, which is fishing, and farming have been destroyed. The government should check the oil companies to minimize pollution and the overflow of oil into the land and the riverine areas. And if such happens, in cleaning up these areas, they should employ the locals to also assist because that will create job opportunies for them. Also, instead of getting only the security agencies to take care of the pipelines, they can also employ this people. This will create opportunities for them to get some money and you find that the pipelines will be safer.
Following the prohibitive cost of kerosene, many common people today resort to felling trees in the forest to get firewood for cooking, a practice that runs counter to government policy on deforestation and desertification. And what must the authories do?
Yes, we deforest because our villagers, our mothers, need firewood to cook. But like you said, if the cost of kerosene is brought down and the gas that we flare everyday is collected for sale at an affordable rate to the masses, deforestation will be minimized. We flare our gas; we waste it when it can be used for our cooking purposes. The cost of kerosene, for instance, can also be brought down if the government decides to use part of the excess crude money to reduce it.
Lately, agents of the federal government accused NNPC of withholding part of the excess crude oil money meant for the Federation Account while the latter has severally refuted this allegation. At the end of the day, the ordinary people who may not understand much of the technicalities get more confused. Who is really telling the truth?
NNPC has not denied withholding part of the excess crude oil money. All they have said is the money they have withheld is the money they spent in excess to import products into the country. For instance, AGO at the international market is now almost 700 dollars per metric tonne, which translates to about 90,000 and above in Naira per tonne. So, the excess they claim is what they are withholding. But if government is properly organized, NNPC has no right to withhold any money. The whole money should be transferred into the Federation Account and from there, any money they have spent to import, they should give the federal government a bill for refunds. What NNPC is doing today is just sit down and take decisions on their own: let us hold this money since we are the ones that are seated here…' Only God knows those that are involved in all these things because since they have been talking about this withholding of money, the federal government has not openly come out to challenge the NNPC or even warn them to desist from that behaviour. But recently, the new Finance Minister, Mrs. Nenadi Usman, came up to suggest that the NNPC should stop this deduction and hence forth, if such monies are needed, they should give the federal government the bill of whatever they have incurred for the government to refund such monies to them which, I think, will be a proper thing to do.
At least from an independent downstream petroleum marketer's point of view, can you avail us an insight into the technical jargon known as bidding for oil blocs?
Many years back, only countries from Europe and America were mainly those that bidded for oil blocs in this country. But recent developments have brought in the Asians, which has made it a bit difficult for only the Europeans and Americans to bid further. In the past, oil companies from Europe and America came in here to buy our OPS or oil blocs in just millions of dollars. But the Asians have come to open our eyes. The bidding these days have gone into billions of dollars, no longer millions. And because the bidding cost is gone high, the Americans and Europeans (the usual oil majors) are now shying back from coming to bid. That is why these days when you look into the oil industry, about bidding, you find only the Chinese, people from Japan, the Indians, Taiwanese, people from Hong Kong, they are the ones that are now bidding to buy, rent or get our oil blocs for drilling purposes. In the past, we had sold these things for peanuts. But thank God for the open door policy. The Europeans in those days made us understand they are the only ones that have the technology to do these things and they closed other parts of the world from participating. This is also as a result of the connivance of some of our people blocking out the Asians from this part of the oil industry because of the money they make from this area. But thank God for this good aspect of (President) Obasanjo's government which has opened it up to other parts of the world. Asians now bid and this has given us so much money in billions of dollars, no longer hundreds of millions that we used to derive from Europeans and Americans.
In other words, more money is now coming in for developmental purposes…
…More money is coming in from the oil industry. Not from drilling now or from the sale of crude oil but selling oil blocs where drilling is done. Apart from the monies we make from selling oil blocs, when the crude oil is sold, we make money also from there.
But the question is: how are these monies being utilized? Are they being used in the interest of the Nigerian masses? We hear of billions of Naira, billions of dollars being spent. These things that they are spending these monies on, have they really looked into the system to find out: what are we going to do to benefit the society? What the government needs is to build infrastructure by way of putting up more housing facilities; by way of coming up with different factories to produce things that we need and people could be made to go and buy shares. The government, in this way, takes off its hands from running such companies because they are now public companies. If factories are built where people have where to work, there will be money for people to spend; there will be jobs for them and at the same time the government will have less headache of having to deal with unemployment in the society. Automatically, you find ancillary industries assisting these industries that create even more jobs. These are supply companies that will be supplying these industries with raw materials. When these persons have employment, their families are secure and extended families are also helped in the process.
[ more stories in this edition ]
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