Nigeria is once again facing widespread fuel scarcity, with queues growing at petrol stations across the country. This comes despite the much-anticipated operations of the Dangote Refinery, which began supplying petroleum products recently. The scarcity has caused frustration among Nigerians and raised questions about the country’s fuel distribution system.
Key Issues Behind the Scarcity
1. Pricing Disputes: The Nigerian National Petroleum Company Limited (NNPCL) and Dangote Refinery are at odds over fuel pricing. NNPCL has stated it will only buy fuel from the refinery if it is cheaper than imported alternatives. Meanwhile, Dangote has called for marketers and NNPCL to prioritize buying locally to reduce reliance on imports. However, some marketers have reportedly been boycotting the refinery due to these pricing issues .
2. Limited Local Refining Capacity: Although the Dangote Refinery has a stock of over 500 million liters of petrol, it hasn’t met all domestic demands. Nigeria’s four state-owned refineries remain non-operational despite decades of promises to rehabilitate them. This has forced the government and marketers to continue importing fuel at a significant cost .
3. Economic Impact: The scarcity is driving up transportation and production costs, exacerbating inflation, and creating economic strain for businesses and households. Food prices, already inflated by over 40%, may rise further if the situation persists .
Government and Industry Actions
To address the issue, NNPCL recently agreed to supply crude oil to the Dangote Refinery, which will be refined and distributed domestically. This partnership aims to stabilize supply and reduce costs, but the results remain to be seen. The ongoing deregulation of the oil sector adds another layer of complexity, as prices are now determined by market forces .
Despite the challenges, experts believe that maximizing the output of the Dangote Refinery and other potential local refineries could help Nigeria save billions in foreign exchange and reduce its dependence on imported fuel. However, comprehensive reforms are needed to ensure sustainable solutions for the sector.
This situation is a critical test for the new administration and its ability to implement lasting reforms in Nigeria’s oil industry.
