Petrol imports’ impact on Nigeria’s economy

Petrol is a fuel for consumption. But an ideal outcome or a conducive level for energy solutions management is continually being sought globally, through factors that will support such a conducive management level (vis-a-vis policy, economics, environment, and technology). After the current environmental health challenge (COVID-19) or the environmental impact from GHG emissions (Climate Change), several meetings have been going on for the right solutions to reduce carbon emissions. So, as the world searches for realistic energy solutions management, through support from good-governance, right policy, financial and business economics; and advanced technology, an optimal protection is pursued to checkmate the pressure of population growth in excessively high (inflationary) cost of energy, as the case may be..

Population growth within an economic environment demands continuous adjustment to adapt to the dynamic changes trending in existing policies, economic factors, prevailing environmental health, and technology that influence global energy consumption. The energy mix has actually migrated (over the years) from biomass, through fossil fuels (coal, crude oil and gas), to the presently advanced technology on clean and renewable energies that is presently taking over in the fight against climate change, due to the GreenHouse gas or carbon emissions.

As the era of fossil fuels is gradually experiencing a decline in demands triggered by the energy transition, one must not lose sight but rather, dig deeper into developmental research in the entire global energy mix, but still retain the relevance of oil and gas; which still dominates the energy mix significantly into the future though with gradual decline in demands.

Petrol importation and the ever rising pump price impact on the economy is practically unsustainable, and presently unbearable. It is something that requires urgent attention, so that Nigerians who consume the product on a daily basis, can have quick relief from the uncomfortable, unending upward review of its price at the pump in this economy. Today, the price has risen to an all-time high of N200 per litre!

This development, in all honesty, cannot be explained or intelligently defended by the operators and regulators, the Nigerian National Petroleum Corporation (NNPC). This inflationary increase, no doubt, is not unconnected to the falling naira exchange rate (being an imported consumable product), which adversely affects all other aspects of commerce and economic activities. This directly affects the quality of life, economic development because it is unsustainable; and, of course, it is not acceptable by most stakeholders, for millions of ordinary Nigerians are aimlessly and hopelessly loitering and wandering in the streets due to unemployment.

Nigeria is a well established sovereign nation.Therefore, the reasons being given, that smuggling of refined products to neighbouring countries is caused by product price differential, sounds very flimsy and unprofessional as an argument. It is more of an act of corrupt practice and sabotage (well intended by the perpetrators), period! How can the common man in Nigeria survive under such a harsh and hostile economic environment? Let no one pretend that we do not know the cause, or the solution to get about it.

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has urged the federal government of Nigeria to remove petroleum subsidy and fix the local refineries. Festus Osifo, its national president, recently spoke at length about the state of the economy and measures to be taken to ensure that oil and gas operations are proactively repositioned ahead of the global energy mix transition from fossil fuels to climate friendly, cleaner energy sources  (solar, wind, hydro, nuclear, voltaic, animal). These are imminent, and are being speculated to take over and dominate demands against fossil fuels, in the near future (a few decades away).

The truth about the situation in the global energy sector is that Nigeria still has a great opportunity to exploit and optimise her chances of reaping the wealth divinely deposited in the oil and gas reserves of the petroleum sector of the economy. Quite rightly, the polymer chemistry aspect that involves production of plastics raw materials (the HDPEs and LDPEs), are already in use, while the other aspect (petrochemistry) that can position the economy as a petrochemicals hub, is yet to be exploited, with the basic feedstocks (natural gas and etcetera) abundantly available. The NNPC should be seen to be exploring this attractive aspect in its products development portfolio, for better economic growth through export oriented activities.

The fact that the main source of foreign exchange earnings (about 95 percent of the total generated revenue for over five decades) in the economy, is from the oil and gas industry (majorly through the upstream extractive operations), hence wearing the look of a mono-export economy. At the same time, Nigeria does not produce more than 10 percent of all her annual consumptions (of goods and services). This invariably translates to the low productivity profiling of the nation’s total Gross Domestic Product (GDP) of the economy. In other words, as much as 90 percent of the nation’s annual consumption is supported through imports (an import-dependent economy, a consumer nation), even if the nation is so poorly profiled on GDP growth, or not capable to diversify her export portfolio in non-oil exports potential. The petroleum downstream is supposed to be super AAA+ rated, globally!

The analytical insight into the nation’s economic growth and development, underpinned by factors of policy, economics, technology, good-governance, is directly influenced by the magnitude or volume of imports made annually. This situation of the economy in Nigeria’s international trade activities, more or less, keeps the economy stagnant and motionless. The picture gets messier now than formerly envisaged, especially by this particular refined petroleum product imports in the downstream, which erases every earnings originally made at the upstream.

Using the 2021 national budget figure of N13.6 trillion to send home the message; the country spent N1.47 trillion in six months on importation of petrol ALONE! Extrapolate it to a full year by simple calculation. How can one imagine that Nigeria, in 2021, would spend N2.94 trillion on imported petrol consumed locally, the equivalent of 21 percent of its national budget, a very significant figure, you would agree.

Although one can take comfort in the upcoming Dangote Refinery, yet something very urgent needs to be initiated by the emerging NNPC under the PIA. As a profit oriented company, under CAMA, it should prompt the DPR to mobilise, in addition to the existing modular refineries and those still being processed, SMEs in the downstream operations, willing to enter into production, to be professionally trained and certified (under global best practices), to utilise a scientifically researched and improved artisanal, indigenous homegrown refining technology. DPR and National Environmental Standards and Regulations Enforcement Agency (NESREA) should collaborate for the environmental governance and product standards to be met by them. The aim would be to continue to shrink petrol imports, and save the economy from further inflation; and keep the country’s foreign exchange in-country..

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Sunny Nwachukwu, PhD, a pure and applied chemist with an MBA in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce. He can be reached on +234 803 318 2105 (text only) or schubltd@yahoo.com