.oil , oil prices, OPEC

…Local refining’s solution – OPS

…Nigerians can’t continue like this, NLC warns

…Says there‘s a limit to what people can tolerate

...Handover moribund refineries to IOCs, Reps tell FG

...Decry N778bn operating loss, $26.5bn spent on maintenance

…Call for expedited action on dredging of the Calabar Seaport

…Crisis to escalate inflation as rate rises to 15.7% – Analysts

..Several flights were cancelled as aviation fuel scarcity persists

..We can only release a number of flights cancelled, delayed after quarterly meetings with stakeholders —NCAA

By Victor Ahiuma-Young, Yinka Kolawole, Sebastine Obasi, Lawani Mikairu, Levinus Nwabughiogu, Prince Okafor & Elizabeth Adegbesan

THE Organised Private Sector, OPS, Nigeria Labour Congress, NLC, the House of Representatives and analysts yesterday painted a gloomy picture of the economy, following the current energy crisis in the country.

Currently, virtually every sector of the economy is groaning from the astronomical rise in the prices of aviation fuel or JET-A1, which currently sells for as much as N600 per litre and diesel which sells for at least N630 per litre.

This came at a time the national grid collapsed on Monday, throwing the whole nation into total darkness.

Consequently, the Organised Private Sector, OPS, and other stakeholders highlighted effective local refining as the way out of the incessant crises in Nigeria’s energy sector.

This is even as the Nigeria Labour Congress, NLC, looking at the implication of the development on the welfare of the people, said there was a limit Nigerians could bear the prevailing circumstances, warning that the energy and fuel crises were pushing Nigerians to the limit.

The House of Representatives, also assessing the gloomy situation, urged the Federal Government to urgently transfer moribund refineries to International Oil Companies, IOCs, operating in Nigeria or other competent private organizations to reactivate them for optimal operations.

This, according to the lawmakers, will enable Nigeria to refine its crude and stop the importation of refined petroleum products which appears to be the crux of the matter.

Meanwhile, financial analysts also said inflation was set to spike more, owing to the ongoing Russian-Ukrainian crisis, as the inflation rate rose to 15.7 per cent in February.

Reacting to the shutdown of flights over the scarcity of aviation fuel; hike in diesel price and looming darkness due to national grids collapse, the National President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, NACCIMA, Ide J.C. Udeagbala, stated: “Our Association is extremely concerned about rising prices of petroleum products; particularly diesel and aviation fuel; a hike which is very possibly an effect of the ongoing conflict in Europe and made worse by a lack of domestic production to meet demand, despite the existence of refineries.

“The implications for the Nigerian economy are far-reaching as the use of these products is entrenched in the production and transportation processes of both the public and private sectors.

“Nevertheless, we do not expect that the shutdown of flights over the scarcity of aviation fuel and the issues of the national grid to bring the economy to a standstill in the short or medium term, rather, with rising prices, we expect rising inflation, further erosion of the purchasing power of the population, and redistribution of wealth that plunges more of the population below the poverty line.

“This is the likely result of the private sector seeking to adapt and adjust to the new realities.

“We use this opportunity to stress once again our call for incisive policy implementation within the energy sector to limit our economy’s exposure to global shocks and serve as a springboard for sustained economic growth.”

Also Read:

.Energy crisis: Nationwide blackout as national grid collapses

Increase local refining capacity-LCCI

In a similar vein, speaking at a Fuel Subsidy Awareness Seminar organised by the Lagos Chamber of Commerce and Industry, LCCI, yesterday, in Lagos, LCCI President, Michael Olawale-Cole, noted that the hike in the diesel price has implications for production downtimes, rise in prices, and eventual loss of jobs, if not curtailed on time.

“The most sustainable way to go is to increase our local refining capacity and save the huge spending of our foreign exchange (forex) on the importation of fuel.

“Oil prices above 110 dollars per barrel had not translated into profits for Nigeria for the reason of equally increasing fuel subsidy payments.”

He noted that with a monthly payment of about N250 billion to subsidise fuel consumption, the sum of N3 trillion was provided in the 2022 Federal Government budget.

“Nigeria’s decision to postpone the full deregulation of the downstream sector of the petroleum industry by 18 months may cost the country over N4 trillion in subsidy payments in 2022.”

Subsidy removal would allow market autonomy-11Plc

Similarly, Chief Executive Officer, 11 Plc, Mr Tunji Oyebanji, stated that failure to deal with subsidy removal once and for all may create a fundamental issue for the Nigerian economy.

He said: “The absence of working refineries had greatly affected the cost of petroleum products alongside smuggling by neighbouring countries and volatility of external markets, following importation of refined oil.

“The suspension of the implementation of some provisions of the PIA such as fuel subsidy removal waned investors interest in the downstream sector.

“If we have taken the decision 20-30 years ago, the pain would have been less than what we have now. You cannot continue to give a political solution to an economic problem.”

Also, Energy Partner, Aelex, Mr Olusina Sipasi, said: “The removal of subsidy would give certainty to consumers and all the players across the value chain.

“Some arguments against subsidy removal included inflation, hardship and promotion of illegal refining. The removal of subsidy would allow market autonomy and sustainability, redirection of funds to other critical areas and tackle environmental concerns.”

Vanguard gathered that the price of Automotive Gas Oil, AGO, also known as diesel which has been fully deregulated now sells for between N730 and N750 per litre in some filling stations in Ikeja, Ojota, Lekki, Ketu and others, that are willing to sell the product in Lagos.

Inflation inches up due to Ukraine, Russian war

Meanwhile, Nigeria’s inflation rate rose to 15.7 per cent in February, representing a 0.10 percentage point rise when compared to 15.6 per cent recorded in January this year, according to a report by the National Bureau of Statistics, NBS, yesterday.

This is even as financial analysts have said that inflation is set to spike more owing to the ongoing Russian-Ukrainian crisis, a prolonged period of fuel scarcity and elevated prices of kerosene and aviation fuels.

Commenting, analysts at Alpha Morgan Capital said: “We anticipate further increase owing to the sustained tension between Ukraine and Russia.”

Analyst at Cardinalstone Research, in their Macro Research titled, “Subsidy Pressures Eroding Fiscal Space”, said they expected higher aviation fuel and diesel prices to pressure core inflation.

They stated: “At our base case, a crude oil price of $100.0/bbl, if the federal government fails to make additional subsidy provisions and chooses to pass on the cost in excess of N3.0 trillion (budgeted subsidy for 2022) to consumers, we expect a 19.2 per cent increase in Premium Motor Spirit (PMS) price to N174.0/litre.

“This hike could add about 95bps pressure on core inflation by our estimate.

“In the short term, we think that inflation will likely tick up due to a prolonged period of fuel scarcity and elevated prices of diesel and aviation fuels.

“Specifically, the global jet fuel touched a 14year high, resulting in about 80.0% to 100.0% increase in airline fees.

“We expect the higher aviation fuels, coupled with the 170.0 per cent year-on-year, YoY, surge in AGO (diesel) price to N650.0/litre to pressure the core inflation, with a negative pass-through effect on the food basket due to higher logistics costs.”

In its Consumer Price Index (CPI) report for February, NBS said: “In February 2022, the CPI which measures inflation increased to 15.70 per cent on a year-on-year basis. This is 1.63 per cent points lower compared to the rate recorded in February 2021 (17.33) per cent.

“This means that the headline inflation rate slowed down in February when compared to the same month in the previous year.

Increases were recorded in all COICOP divisions that yielded the Headline index. “On a month-on-month basis, the Headline index increased to 1.63 per cent in February 2022, this is 0.16 per cent rate higher than the rate recorded in January 2022 (1.47) per cent.

“The urban inflation rate increased to 16.25 percent (year-on-year) in February 2022 from 17.92 percent recorded in February 2021, while the rural inflation rate increased to 15.18 percent in February 2022 from 16.77 percent in February 2021.

 “On a month-on-month basis, the urban index rose to 1.65 percent in February 2022, up by 0.12 the rate recorded in January 2022 (1.53) percent, while the rural index also rose to 1.61 percent in February 2022, up by 0.19 the rate that was recorded in January 2022 (1.42) percent.”

On food inflation, the bureau said:” The composite food index rose by 17.11 percent in February 2022 compared to 21.79 percent in February 2021.

“This rise in the food index was caused by increases in prices of bread and cereals, food product, Potatoes, yam and other tuber, oils and fats and fruit.

“On a month-on-month basis, the food sub-index increased to 1.87 percent in February 2022, up by 0.25 per cent points from 1.62 percent recorded in January 2022.”

NLC decries persisting scarcity of petroleum products

Reacting to the energy crisis in the country yesterday, the Nigeria Labour Congress, NLC, said there was a limit Nigerians could bear the prevailing circumstances, warning that the energy and fuel crises were pushing Nigerians to the limit.

NLC in a statement by the President, Ayuba Wabba, cautioned:  “There is an extent to which the people can endure the current hardship occasioned by the scarcity of refined petroleum products.

“It is with great pain, sadness and alarm that the Nigeria Labour Congress observes the recurring scarcity of petroleum products in different parts of the country. A crisis that started with the supply of sub-standard Premium Motor Oil, PMS, degenerated into a persisting scarcity of not only PMS but also other petroleum products such as diesel and aviation fuel.

“Currently, a litre of aviation fuel sells as high as N580, while a litre of diesel goes for as high as N625. In many parts of the country, a litre of PMS goes as high as N220. The socio-economic strain of both the scarcity and the high cost of petroleum products on ordinary Nigerians and manufacturing firms is best imagined.

“In many parts of Nigeria, manufacturing has ground to a halt. The current haemorrhage induced by the prevailing scarcity of petroleum products has very grave concomitant effects on the already parlous unemployment and security situation in our country.

“At the root of the current pain being faced by millions of Nigerians all over the country is the defective policy of nearly one hundred per cent importation of refined petroleum products. Nigeria is about the only OPEC country trapped in the quagmire of complete dependence on foreign refineries for products it has the capacity to produce locally.

“This is a most unfortunate commentary on our sovereignty.  The Nigeria Labour Congress has at different fora and through diverse media, called the attention of the Federal Government to the grand danger of outsourcing our energy needs to foreign interests.

“We warned of the looming crisis of energy insecurity, adulterated petroleum products, capital flight, the decline in productivity, de-investment in the Nigerian economy, massive loss of jobs and upsurge in criminality cum violence all over the country.

“The persisting scarcity of refined petroleum products has unleashed a tsunami of very dire economic realities, including exorbitant airfare, cancellation of scheduled flights, destruction of thousands of automobile engines by adulterated fuel and wastage of productive hours. In short, today’s reality screams: “Crisis Foretold”.

“As clearly captured in the Nigerian Workers’ Charter of Demands, the only way out of this energy impasse is for the Federal Government to take very seriously the local refining of petroleum in Nigeria. We had severally identified the complete rehabilitation of our public refineries and the building of new refineries, both public and private, including modular refineries as the only sustainable panacea out of this national embarrassment and vulnerability in the security of our energy sector.

“With the current surge in the price of crude oil, we urge the Federal Government to make judicious use of the bumper harvest of petro-dollars to fix our oil refineries. We must re-think Nigeria’s hydrocarbon as a strategic asset for sustainable wealth creation and development.’’

Transfer moribund refineries to International Oil Companies, IOCs-Reps

Similarly, the House of Representatives yesterday urged the Federal Government to transfer moribund refineries to International Oil Companies, IOCs, operating in Nigeria or other competent private organizations to reactivate them for optimal operations.

The call followed the adoption of a motion of Urgent Public Importance sponsored by Dagomie Awaji- Abiante at plenary.

Presenting the motion, Abiante said there was a need for President Muhammadu Buhari’s administration to save Nigerians from the recurring hardship of petroleum products scarcity across the country.

Recalling that the exploration of crude oil commenced in Nigeria in 1937 when Shell D’Arcy was granted the sole concessionary rights over the whole territory of the country and that crude oil was first discovered in commercial quantity in Oloibiri in present-day Bayelsa State in 1956 when the company drilled the first successful well, the lawmaker also expressed concerns that the non-functioning of the refineries had resulted in the payment of fuel subsidy, importation of bad fuel, and the resurgence of long queues at failing stations across the country which has seriously impacted negatively on the wellbeing of Nigerians.

He lamented that a whopping sum of  $26.5 billion is being wasted on the Turn-Around Maintenance of the moribund refineries.

He said: “The amount spent so far on the Turn-Around Maintenance of these moribund refineries is capable of building three new refineries of the same size going by the cost analysis of refinery projects across the world.

“If the moribund refineries remain under the control of the Federal Government, coupled with the inefficiency of the agencies of government in charge, it will be a great disservice to Nigerians who continue to bear the brunt.

He said:  “In order to meet up with high demand for refined petroleum products, as a result of increasing population and economic activities; the Federal Government constructed three additional refineries, namely: the Warri Refining and Petrochemical Company with a capacity of 125,000 bpsd, commissioned in 1978; the Kaduna Refining and Petrochemical Company With a capacity of 110,000 bpsd, commissioned in 1980; and the New Port Harcourt Refinery with a capacity of 150,000bpsd, commissioned in 1989.

“The aforementioned refineries have become moribund and obsolete, and in an effort to resuscitate them, the Federal Government has spent a whopping sum of  $26.5  billion on their Turn-Around Maintenance which has not yielded any positive results.

‘’The House notes that during the tenure of President Olusegun Obasanjo, machinery was put in place to commence the process of privatization of the nation’s refineries from unnecessary wastage of foreign exchange earnings on Turn-Around Maintenance and operating losses.

“Apart from the reported $26.5 billion, these refineries have in recent years reported operating loss of N778.71 billion (Punch Newspaper, 19 March 2021) on these critical assets which can clearly be termed as wasting assets.

‘’The House believes that having wasted billions of dollars over the years, the Federal Government of Nigeria cannot successfully execute the Turn-Around Maintenance of the moribund refineries, hence it will be better for the Government to seek alternatives with a view to ensuring their resuscitation.”

Adopting the motion, the House mandated its joint Committees on Petroleum Resources and Public Procurement to ensure compliance to the resolution.

In a related development, the House also urged the Federal Government to re-award the contract for the dredging of the Calabar Seaport to a reputable company with a mandate to complete the project within a specified time frame.

The call was a sequel to a motion by  Alex Egbona.

The House equally asked the Nigerian Ports Authority, NPA, to supervise the project and ensure that standard depth was established to enable larger vessels to berth in line with international best practices.

It, therefore, mandated its Committee on Ports and Harbours to investigate the contracts awarded in 2006 and 2014 respectively, with a view to ensuring that all factors militating against complete dredging of the Calabar Seaport were resolved.

Meanwhile, several flights were cancelled by airlines yesterday, as the scarcity of aviation fuel continued to take its toll, leaving passengers stranded at airports across the country.

However, the regulator, the Nigerian Civil Aviation Authority, NCAA, said it could only release the total number of flights cancelled during the period of scarcity after its quarterly meeting with other stakeholders.

“ We don’t just release figures. We meet quarterly with other stakeholders and reconcile what we have with them to avoid confusion and disagreement. It takes time and procedures,’’ NCAA spokesman, Sam Adurogboye, said.

Spokesman of one of the domestic carriers, Kinglsey Ezenwa of Dana Airlines told Vanguard yesterday:  “ Yes, we operated our scheduled flights. We are still grappling with the situation and operating. We hope the situation improves in the coming weeks after the National Assembly meeting.’’

Vanguard News Nigeria

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