Nigeria’s Minister of state for Petroleum, Dr. Ibe Kachikwu was summoned by the Nigerian Senate yesterday over the lingering fuel crisis in the country.
Dr. Kachikwu had earlier been criticized by the National leader of the All Progressives Congress, Asiwaju Bola Tinubu over his gaffe when he said he’s not a ‘magician’.
Dr. Kachikwu appeared before the Senate Committee on Petroleum Resources and apologized for his earlier comments. “I do apologise for the comment that I made jocularly with my friends in the press about being a magician and it offended Nigerians. It was not meant to be, it was a side jocular issue.” He said.
He went on to explain at length the root problems of the present fuel scarcity; “Let me put the reasons for the scarcity in three categories. First, what did I meet? When we came in August, this country had arrears of unpaid subsidy claims that were in excess of N600 billion which were not paid for over a year.
“So, progressively over a period of eight months, prior to my coming on board, people have been staying away from importation not at a heavy level but by about 10 to 15 percent of allocation were not being met. But there was hope that ultimately if the subsidy regime continues, they would get paid. So, some people continued to import, but by the time we came in, people had reached a breaking point and most of the companies didn’t have the liquidity even to go to the banks and open letters of credit and that became a major issue, and we succeeded in paying, late October last year, the N500bn subsidy.
“Some element of the subsidy like the foreign exchange components remained unpaid, which has been carried into this year’s budget. It became clear to me that having regards to the difficulty that we faced in terms of paying for the subsidy, the country can no longer, quite frankly, afford subsidy payment.
“We were faced with the challenge of ensuring supply of petroleum products without the need for a subsidy regime. As of January 1 this year, the country is no longer paying subsidy, saving us a cumulative of over N1trillion in a one year period. That was the first major issue.
“Second major issue was that once the N600bn subsidy money was paid, the ability of marketers to import the product became a challenge because they could not raise letters of credit and up to this point that still remain a major issue.
“So even if they wanted to import, they needed letters of credit and adequate foreign exchange cover. Some of them were owing arrears of liabilities as a result of commitment I had made on petroleum importation prior.
“So, whatever money they had was taken by banks to offset certain obligations. Going forward now, they didn’t have money to import fuel again. What that meant was that by late August last year, we moved from the expected obligation of the NNPC to bring in 50 percent of the national consumption of about 45 to 50 million litres per day but we now have to cover a 100 percent platform because nobody was bringing in the product, the consumption was still static and we needed to cover the gap.
“We took up that challenge without increase in crude allocation, without any excess allocation as it were and we have to work exceedingly hard from August last year to cover the gap but we didn’t cover it 100 percent because we didn’t have the ability to do so. So, the gap we could not cover was responsible for the queues. That was responsible for the 80 percent of the problem.
“Third issue is that of pipeline vandalism. We met pipelines that were in comatose, for instance, Mosimi was not working. This morning, after a three months intensive work with private partners, we just been able for the first time, to recover the Escravos to Warri pipeline and about a month ago, we recovered the Brass to Port Harcourt pipeline. For the first time, we will be able to pump crude to the refineries without the need to use vessels which are extremely expensive which I stopped as soon as I came. For the first time in six years, we are trying to recover the pipeline.
“We have 18 depots across the country. 90 percent of them are not in a state of use. They have not been maintained. They have been abandoned for years. Money was needed to work on them. But we have advertised for joint partners to come in and work with us to put in the required facilities to get depots working and get pipeline repaired. But through hard work we have been able to recover some pipeline from Mosimi up to Ilorin but with a few punctured points. The crude pipeline from the South to the North again being recovered. The absence of the pipelines, makes movement of the products from Lagos taking up to a week.
“Because the importers are not bringing in the product, the logistics of the NNPC had been expanded, creating great nightmare for us. Not only do we bring in the product but we also lighten it and take it to the storage tanks of the majors and some cases if you notice, we also are taking intervention trucks and taken products into the stations of this individuals because if they do not sell and the stations are empty, it is a challenge. NNPC basically overextended itself in terms of what it was set up to do and what it has the capacity to do.”
Dr. Kachikwu assured Nigerians that the present fuel crisis will end in two weeks; “We expect that between now and about the 6th to 7th of April, the fuel queues will disappear, the DSDP will begin and the foreign exchange allocation will see us smoothly through the track.
“The refineries will be working and the volumes they would be producing will be sent to the strategic reserves to address difficult times. In April, we are expected to get to get 150 percent of the volumes that would be needed. A lot of that will go to storage tanks. Hopefully, that should sort out the problem.”