The Nigerian cyberspace was recently awash with commentaries over the signing of MOU by the governments of Nigeria and Niger Republic on sales and purchase of petroleum products from Soraz Refinery, Zinder.
Gleaning through the tone of conversation, one could easily infer that the commentaries were being driven by pride – the “giant of Africa” myth – rather than fair scrutiny of the realities of ground. But commercial transactions and international business deals are not secured and delivered on the basis of presumptuous, nay contested economic hegemony. I’ll explain.
According to National Bureau of Statistics (NBS) data, the average daily consumption of petrol in Nigeria in 2019 was 57.2 million liters. Let’s juxtapose this with 18 million liters installed daily gasoline yield of our refineries in Port Harcourt, Warri and Kaduna (under the assumption the three refineries with 445,000 bopd crude intake are working at 100% capacity). This leaves us with a shortage of about 38 million liters which must be sourced from imports to ensure sustainable national supply of fuel and avoid scarcity.
The coming on stream of the much anticipated Dangote Refinery would add about 27 million liters (extrapolation using the installed yield of NNPC Refineries). Thus, about 11 million liters of gasoline would have to be sourced locally from modular refineries production and also through imports. Accordingly, the proposed importation of petroleum products from neighbouring countries like Niger Republic is not out of place. It is the most pragmatic decision to make in view of the existing realities and the opportunities at hand.
One doesn’t need to gain intermediate knowledge of economics to appreciate the fact that it makes more sense to deploy commercial solutions to address commercial problems. For instance, use of security forces to fight cross border smuggling despite consuming enormous resources in personnel costs and equipment, is not usually effective as it creates a rent-seeking and arbitrage environment that corrupts and compromises controls. On the contrary, execution of commercial instruments like MOU which will eventually transmute into an agreement under the ECOWAS protocols or bi-lateral framework would result in a positive win-win outcome for the two countries as follows:
1. Nigeria will consolidate its national energy security by diversifying its supply sources of petroleum products and sourcing a fraction from Soraz Refinery through the land border instead of 100% imports that currently come via the coastline.
2. Nigeria will have recourse to cheaper petroleum products as freight (shipping) will not be part of the landing cost of imported gasoline, diesel, kerosene etc. The insurance cost would also be lower as truck/pipeline insurance will be required instead of much expensive marine insurance.
3. CFA would be used for imports settlement instead of the scarce US dollar.
4. The economics of products distribution in northern Nigeria will be greatly enhanced in a post-deregulation market environment due to lower pipeline tariff and haulage cost scale result of shorter distance from Zinder to a border town in Nigeria where the depot/terminal will be sited. This would results in lower pump prices of petroleum products in these areas when compared with prices based on longer distribution costs from Lagos and other coastal areas.
5. Niger Republic will have opportunity to evacuate excess refined petroleum products to a readily available market in Nigeria thereby improving the economics of its refinery business and its GDP.
6. Development of pipeline and depot/terminal infrastructure in the two countries would create direct and indirect jobs for their citizens.
And there you have it! Products importation from Niger Republic is not only a strategic and pragmatic solution, it avails us with great opportunities. We just need to shove our pride aside and put the thinking cap. Kudos to the two countries!
Mr Sanyi-Sanyi, a financial expert, writes from Abuja.