Like most places that observe the holiday, Christmas in Nigeria is a time of joy, goodwill, celebrations and festivities.
But it is also a time of gas shortages and fuel station queues that are so long they clog up traffic. This year, queues started forming yet again across major cities in Nigeria as oil marketers and government officials have cited low supplies.
Here’s the problem: the inability of Africa’s largest oil producer to refine oil locally means it has to rely on imported petrol products.
NNPC, Nigeria’s state oil company, sources refined products through a direct sale-direct purchase system that depends on independent marketers bringing in refined products. But, as oil prices have recently increased, marketers are pushing for more concessions from NNPC in form of subsidies or an increase in pump prices. Marketers currently claim they cannot bring in petrol at the moment given the prospect of lower profit margins and, anticipating the shortages, petrol stations across the country have been hoarding petrol.
“They want the government to adjust the price upwards so they can raise [their] profit margin and resume supplies,” Dolapo Oni, head of energy research at Ecobank Development Company, tells Quartz.
To make up the shortfall in supplies, NNPC has reportedly started importing petrol, but that arrangement is not sustainable as previous shortages have shown. In May 2015, following a dispute between fuel importers and the government, a critical petrol shortage resulted in a near-total shutdown of the economy as media, banks and telecoms firms were forced to shutter operations. As NNPC cannot cater to imports by itself, enlisting marketers to import and distribute petrol products across Nigeria is crucial to meeting demand nationwide.
One reason prices tend to be higher around this time of the year is increased demand for petrol products in most regions where Nigeria imports from. “Prices around winter always tend to be higher,” Oni says. “We are meant to adjust our prices, but we don’t. Consequently, we always have these issues around December.” The alternative, if the petroleum industry was deregulated, would be for prices to be dictated year round by market forces of demand and supply.
Beyond the pricing fluctuations, marketers are also likely wise to the fact that petrol shortages around the festive season is a reliable tactic to get the government’s attention. But it’s not just marketers either: a union of government workers in the oil and gas sector looking to negotiate better working conditions for the union members have also threatened an indefinite strike. To avoid a shutdown in the industry and avoid fuel shortages at a crucial time of the year, the government is likely to engage the union in the coming weeks. “There’s a heightened demand for fuel around this time,” Oni says. “Clearly it’s a good opportunity to get what you want from government.”
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