This morning, I received some bad news: NNPC has formally invoked a “family planning” system for distributing petrol products. To put it simply, the highest bidder takes all.
I am reminded by an adage, ”truth brings pain while lies cause destruction”. For years on end, NNPCL has been serving Nigerians with food that comprises half truths only and also some other deceptions for that matter which only serve to obscure the actual problems facing our oil sector.
The outcry surrounding this policy move shows how deeply rooted corruption and inefficiencies are among NNPC officials.
It is shocking that even as custodians of national oil resources NNPC have refused to provide accurate records of daily petrol consumption figures. This kind of absence of transparency has given room for fuel subsidy scam draining our national treasury dry leaving it so weak economically.
President Tinubu’s bold move to allow sale of crude oil in naira is a big step ahead. That said there are key fundamental issues that need to be considered too.
We rely heavily on imports, with more than half of our import bill consisting of petroleum products. This concentration risk has left us struggling, as our reserves have constantly diminished, while inflation rates continue to rise.
Although Dangote Refinery’s entry into the market may not automatically reduce pump prices, it is a step towards local production and economic development.
This would mean lesser demand for dollars, consequently enabling us to avert pressure on our foreign currency reserves and possibly even appreciate the naira.
However, doubts remain. Will this policy shift exacerbate the current economic crisis? Can the government manage to avoid falling foreign exchange earnings? The only solution is to fight systemic corruption, especially in the oil sector.
Years of corruption and inefficiencies have characterized NNPCL. It’s disturbing to see the KPMG Report label NNPCL as “a house of corruption” or the BBC exposé refer to it as a suspected fraud involving $16 billion. The fact that NUPRC and NNPCL don’t share the same data on oil production implies a lack of integrity and control over resource management.
Nigeria’s complete import bill for the year 2023 was $45.95 billion, out of which petroleum products accounted for 54.4% ($25 billion). This staggering figure emphasizes the vulnerability of our economy. Facilitating local refining will help reduce our reliance on imports and encourage more production locally.
The Vice-President, Kashim Shettima, said that Nigeria spends over $25 billion annually on petroleum product imports, and it is possible for this huge amount to be better spent on critical sectors, including education, healthcare, and infrastructure.
Additionally, our economy has also suffered from the constant devaluation of the naira. In this way, the CBN would have a more efficient intervention in the forex market by supplying banks, along with authorized BDCs, with dollars to meet demand. Thus, stabilizing the naira and leading to a decrease in inflationary pressures.
Nonetheless, there is much skepticism surrounding it. Some experts advise that such a policy change may exacerbate economic problems, especially when the government fails to manage the decline in foreign exchange receipts. Others also question its timing, pointing at possible disruptions to an already fragile economy.
To fully appreciate this policy, the government has to confront graft head-on. Hence, by meeting OPEC’s quota of 1.5 million barrels per day, these would stabilize Nigeria’s foreign exchange earnings, enabling financial stability.
A great read