Most refineries are designed to produce certain specifications of petroleum products, depending on the market requirement. Though, some modern refineries are equipped to produce varying specifications of the products. This enables marketers to buy petrol and blend it with some chemical substance to meet varying destination requirements.
Each country has a specific chemical composition requirement for their petrol. The marketers or refineries can blend the petrol to suit each country’s specifications.
Methanol is a chemical substance added to petrol for smooth running in car engines. It helps in increasing fuel efficiency and reducing energy intensity and CO2 emissions. The Nigerian gasoline-powered vehicles are compatible with petrol blended with up to 5% methanol. Some countries allow only 2-3% of the methanol in their petrol.
Early February 2022, Nigeria imported 200 million litres of petrol from Belgium through a crude oil swap arrangement. The imported petrol contained methanol up to 20%, which is far above the methanol content threshold in Nigeria. This petrol is called off-spec petrol for Nigeria. For any Nigerian vehicle to use this petrol, it has to be retrofitted. Countries like Brazil and Germany who retrofitted some of their vehicles may use this kind of specific petrol.
Nigerian officials were not aware of the off-spec petrol, and they allowed it to enter the Nigerian market. Some vehicle owners started noticing some damages and malfunctions in their vehicles after taking the off-spec petrol. That was when Nigerian officials realised that the imported petrol was not suitable for Nigerian vehicles. They had to call all the petrol back to the depots.
The withdrawal of the 200 million litres of petrol created a supply glitch in the country, hence the scarcity. Since Nigeria is vulnerable due to its sole reliance on imported petrol, Nigerians have to wait in queues at filling stations until the next importation. Any slight petroleum import glitch always affects Nigeria significantly.
Had it been Nigerian officials have tested for the methanol content, they would have noticed it since from the departure country or at least when the vessels arrived at the Nigerian seaports. Nigerian officials only test for vapour pressure, benzene, sulfur content, and density. From this experience, Nigerian officials should start testing for methanol content levels for any imported petrol.
The resultant scarcity has created a window for unscrupulous petroleum sellers to charge exorbitant prices. Unconfirmed reports suggested that a litre of petrol is sold at N1000 in some places. The welfare of the people has been negatively affected as a result. People sleep in the queue at filling stations. The movements of people and goods have reduced significantly, slowing down the entire economy and pushing inflation further high.
For the supply to stabilise, more petrol has to be imported to clear the queues and meet the subsequent usual daily demand. The Nigerian officials committed to buying 2.3 billion litres of petrol to bridge the supply gap. The importer of the adulterated fuel must take it back and re-supply its equivalent with some additional penalties.
It might take weeks or months to bridge the supply gap. The 2.3 billion litres of emergency imports will add to spending on the side of the government for petroleum consumption. Already the government is planning to spend N2.6 trillion for petroleum subsidy consumption. These are huge burdens just for petroleum importation and subsidising petroleum consumption in Nigeria.
No administration will ever succeed without stopping petroleum importation and removing petroleum subsidies. However, the removal of the subsidy must be under certain conditions and through a certain gradual process. These conditions include sufficient local refineries, exchange rate stability, and single-digit inflation.
The steps for removing the subsidy include petroleum consumption auditing to ascertain and track petroleum consumption. The next step is the petroleum consumption reduction program, which will target reducing the daily litre consumptions in Nigeria from 70 million litres to about 30 million litres. This is possible by targeting large consumption cities like Abuja, Lagos, and Kano.
The programme will require investment in mass transport systems, which include convenient public trains, light rail transit, and busses in these cities. The idea is to impose car taxes to discourage people from using their cars and incentivise them to use the public transport systems. This will reduce the energy per capita consumption in these cities and encourage the use of alternative fuels like CNG and LPG in these mass transport facilities. The programme could be extended to other major cities gradually.
Imagine a scenario of ten people going to the same office daily, using ten different cars at the same time, and consuming the same quantity of fuel each. If coming and going to the office consumes 5 litres daily, it will mean 5 litres multiplied by 10 people, which is 50 litres of petrol daily. But when they all use one vehicle, the energy consumption will be only 5 litres daily, which means petroleum consumption is reduced by 90%. The payment of subsidy for these people will reduce by 90%. That is the energy conservation process of removing the petroleum subsidy.
But the public transport systems must be in place first. The private sector could be mobilised for such investments. Then, the next step will be the implementation of the targeted subsidy, which I explained clearly in my previous article.
The subsidy issue has been and will continue to be an issue and a great burden on the government. After fixing the current petroleum scarcity, the government must come up with a strategic roadmap for addressing the subsidy issues. The current scarcity is one of the serious shortages Nigerians have experienced in a decade.
Lastly, the question now is why and who imported the off-spec petrol into Nigeria? Was it deliberate? Was it the refiner or the marketer? This investigation must be conducted, and Nigerians must be informed.
Punishing the culprits would also serve as a deterrent to others. The marketers might have blended the petrol on the sea during the transit, or it might be the refiner that mixed the wrong quantity of the methanol. Whatever, Nigerians will be waiting for an explanation and looking forward to measures that will prevent future occurrences of the situation.
Ahmed Adamu, PhD
Petroleum Economist
[email protected]
