Thursday, April 7, 2016

Nigeria fuel crisis: Why is Africa's largest oil producer short of petrol?

A man sleeping on the boot of his car in a fuel queue in Nigeria
 People wait in queues for hours for petrol

Despite being one of the world's biggest oil producers, Nigeria imports most of its fuel and is currently facing a severe shortage. 

It does not have enough oil refineries and even if the four it has were running at full capacity, they would only supply a quarter of the country's needs, says John Ashbourne, an economist at the financial research firm Capital Economics.

To meet demands, the national oil company imports around 50% of its fuel needs. The remainder is then supposed to be imported by private fuel distributors. 

But for months these companies have been reducing their imports leading to the current fuel shortages.

The BBC's Nigeria correspondent Martin Patience looks at three reasons why:

1) Outstanding debts

For years, the Nigerian government paid a fuel subsidy to make it cheaper at the pump. But it was hugely expensive when the price of oil was high.

The current government, which came to power last May, said it inherited massive debts from the previous administration. 

Fuel distributors were initially left out of pocket.

Finally, the government paid the bill in November. But by that time, companies had already started slowing fuel imports.

2) Currency crisis

The slump in global oil prices is hammering the Nigerian economy.

It has led to a shortage of the US dollars needed to pay for imports.

With the country facing a currency crisis, the distributors are struggling to get their hands on dollars to pay for fuel imports.

They say they are being forced to use the black market where they pay a far higher rate.

3) Fuel subsidy dispute

In January, the government ended official fuel subsides saying the cost of oil had fallen so much that they were no longer required.

But the fuel distributors disagree. 

In protest, some companies stopped selling fuel during this dispute.

As the shortages increased, others hiked their prices above the official government rate - leading to accusations of profiteering.

Some analysts predict that until the fuel subsidy is reintroduced or official retail rates are allowed to rise, distributors will continue to limit the supply. 

And for Nigerian motorists that could mean the long wait at the pumps will go on.

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