The persistent fuel scarcity and rising cost of petroleum products in Nigeria over the last two months have caused a lot of distress and dissatisfaction among Nigerians. Many vehicle owners spend long hours at petrol filling stations in most cities across Nigeria just to buy fuel. In some cases, people waste several hours waiting in line at filling stations, time that could be better spent on work or other meaningful activities.

This challenge has been a recurring issue over the years and has had a significant impact on the country's economy. Citizens are not only struggling to obtain the products at various filling stations to fuel their vehicles, but are also dealing with the soaring cost of fuel, which has suddenly increased from 600 naira (about 0.40 cents) to about 950 naira (about 0.70 cents) in Abuja and Lagos in the last two months. The cost of fuel is even higher in the northern part of Nigeria, especially in cities like Kano, Sokoto, Borno, and Yola.

In Nigeria’s capital city, Abuja, fuel scarcity has become a major concern for workers, especially civil servants, who are facing rising transportation costs due to the lack of availability of fuel. In fact, many vehicle owners have been forced to leave their cars at home due to the scarcity of the product and its high cost. Many low-income earners and poor people who cannot afford the high transportation costs have been forced to walk to work in order to survive the hardship.

Declining middle class

The middle class and the poor have been hit the hardest, suffering under harsh conditions and becoming disillusioned. Many have been forced to give up their cars and use public transport, which has led to a 100 percent increase in transport fares across the country. This troubling trend is also seen in Lagos, the commercial center of Nigeria, and in other cities across the country. The new government, led by President Bola Tinubu, which came into office last year, has been unable to alleviate the citizens' suffering. The government insists that it can no longer afford fuel subsidies due to mounting foreign debt repayment obligations.

Nigeria's fuel crisis has become more apparent since the federal government removed fuel subsidies on May 29, 2023. Since then, inflation has soared to over 33 percent, pushing many families into poverty and destitution while eroding the middle class's ability to meet their needs.

Reliance on fuel importation

Nigeria is the largest oil-producing country in Africa, but it has inadequate refining capacity. Four of its refineries in Port Harcourt, Kaduna, and Warri have been non-functional for the past 22 years due to poor mismanagement and corruption, despite spending millions of dollars on maintenance. As a result, Nigeria has to export crude oil and import fuel from Europe and Asia, putting pressure on its foreign reserves.

The country has become vulnerable to the volatility of the global oil market, along with increased shipping costs and inefficient supply chains, leading to distortions in the system. Importing fuel has led to a devaluation of the currency by over 100 percent and a dwindling supply of foreign exchange, exposing Nigerians to periodic fuel scarcity.

Even though the Nigeria National Petroleum Corporation Limited (NNPCL) has been subsidizing imported fuel since June last year, the corporation recently admitted it cannot continue to do so due to mounting debts to oil traders, reaching about 6 billion dollars. Consequently, oil traders abroad have been unable to supply the product, leading to scarcity across the country.

Local currency depreciation

The current fuel shortage has worsened due to the devaluation of the local currency, the naira, last year. Since the Central Bank of Nigeria adopted a floating exchange rate system in June 2023, allowing the currency's value to be determined by market forces, the naira has weakened by over 120 percent. The currency's value is currently determined by buyers and sellers based on demand and supply, influenced by factors such as trade balances, interest rates, and capital flows.

The adoption of the floating exchange system has weakened the local currency, making fuel importation more expensive and negatively impacting the cost of transportation and living conditions across the country. This trend has further eroded the purchasing power of an average citizen, as many can no longer afford to use their vehicles due to rising fuel costs and scarcity. The resulting increase in the prices of imported goods has made them unaffordable for many citizens.

Smuggling

The smuggling of petroleum products across neighboring countries such as Niger, Benin, Cameroon, Togo, and Chad by unscrupulous individuals has worsened fuel scarcity in Nigeria. Fuel prices are much higher in these neighboring countries compared to Nigeria, making it easier for dishonest individuals and saboteurs to engage in smuggling in order to make a quick profit at the expense of the citizens.

While Nigerians continue to suffer from widespread fuel scarcity and lack of availability at filling stations, some individuals, in collaboration with corrupt officials, have facilitated the smuggling of fuel through the land borders to neighboring countries. This economic sabotage has further worsened the economic conditions of the people, who are forced to pay higher fuel costs in the country.

Start of fuel production at Dangote Refinery

The NNPCL has no choice but to purchase refined fuel from the Dangote refinery, the only private refinery in Nigeria that began producing fuel earlier this month. However, citizens, who are struggling with the country's inflation, were surprised by the recent announcement of a price increase in gasoline purchased from the local refinery on September 15, 2024. The Nigeria National Petroleum Corporation Limited (NNPC) raised the cost of petrol from 0.40 cents to 0.75 cents per liter.

This increase in fuel prices has disappointed Nigerians who had hoped that locally refined petrol from the Dangote refinery would be cheaper than imported fuel, leading to lower transportation and food costs. However, since crude oil is sold in dollars and the Dangote refinery imported crude from the United States of America and Brazil due to insufficient crude from Nigeria, the company is forced to sell at a margin that allows it to make a profit and continue refining the product in the country.

The Nigerian government has agreed with the Dangote refinery to purchase crude oil in the local currency, Naira, starting from October 1, 2024. This move is intended to ensure that cheaper fuel is available to citizens at an affordable price. It is expected that this measure will significantly reduce transportation costs and alleviate the people's suffering.

Despite the hardships faced by Nigerians in recent months, many are hopeful that the era of fuel scarcity will soon be a thing of the past with the effective start of the Dangote refinery and the rehabilitation of the Port Harcourt refinery.