Fuel scarcity: Kachikwu apologises to Nigerians

Says “I’m not a magician” comment was exaggerated

Explains how stoppage of fuel subsidy payment led to scarcity

Minister of state for Petroleum Resources, Mr. Emmanuel Ibe Kachikwu, on Tuesday apologised to Nigerian over the lingering fuel scarcity in the country.

Kachikwu who appeared before the Senate Committee on Petroleum Resources, (Downstream) noted particularly that his comment that he is not a magician to cause fuel queues to disappear overnight was not meant to insult Nigerians.

The “I’m not a magician” comment he insisted, was made jocularly and was never intended to slight Nigerians.

The minister said that he shares the pains Nigerians were going through to get fuel as well as working round the clock to find solution to the problem.

He rejected the call for him to resign over the biting fuel crisis but assured that the fuel queues would disappear within the first two weeks of April, 2016.

“Let me thank the Senate for taking time out from your recess to come to dialogue this issue. It shows the importance you attach to the petroleum industry and the feelings of Nigerians.

“Let me just digress. I share the pains of Nigerians. I feel that pain everyday when I walk the streets. On Easter day I was in Lagos monitoring fuel distribution and the depots, I have given 24 hours attention to the problems.

“I have continued to work with one sole purpose which is that every problem must have a solution and I think that is the reason I was picked.

“I do apologise for the comment that I made jocularly with my friends in the press about being a magician and it offended Nigerians. It was not meant to be, it was a side jocular issue.

“I did go on to explain what needed to be done. I did not know that it would create the kind of hyperbole that it did.

“Let me first admit that I am not a typically experienced politician. I am a technocrat. I come to work.

“Some of the phraseologies that I may use, while being acceptable in the arena in which I play obviously will not be acceptable in the public political arena.

“So if any body’s sensibilities were offended by those, I totally apologise.”

“I share the pains of Nigerians. I feel that pain every day. I worked the streets and those who are following my trajectories since I resumed office would see that even on the Christmas day,  I was at the refineries.

“Like I said on the Easter day, I was in Lagos, monitoring fuel distribution at the depots. I have given 24/7 attention to the problem in this industry which were unbelievable.

“I have continued to work with one sole purpose in mind, which is that every problem will have a solution.

“I do apologize if a comment I make jocularly with my friends in the press about being a magician offends some Nigerians, it wasn’t meant to be. It is a side jocular issue and I did go ahead to explain what needed to be done.

“I didn’t intend to create this kind of hyperbole that it did.  Let me admit that I am not a typically experienced politician. I am a technocrat, I came to work.

“Some of the phraseologies that I may use while being acceptable in the arena in which I play, obviously will not be acceptable in the public political arena. If anybody’s sensitivities were offended by that, I totally apologise.

“I am a very humble person even imagining the thought that I dictate to Nigerians. I am not somebody like that.”

On the reason for the current fuel scarcity he said, “Let me put the reasons for the scarcity in three categories. First, what did I meet? When we came in August, this country had arrears of unpaid subsidy claims that were in excess of N600 billion which were not paid for over a year.

“So, progressively over a period of eight months, prior to my coming on board, people have been staying away from importation not at a heavy level but by about 10 to 15 percent of allocation were not being met. But there was hope that ultimately, if the subsidy regime continues, they would get paid. So, some people continued to import, but by the time we came in, people had reached a breaking point and most of the companies didn’t have the liquidity even to go to the banks and open letters of credit and that became a major issue, and we succeeded in paying, late October last year, the N500bn subsidy.

“Some element of the subsidy like the foreign exchange components remained unpaid, which has been carried into this year’s budget. It became clear to me that having regards to the difficulty that we faced in terms of paying for the subsidy,  the country can no longer, quite frankly, afford subsidy payment.

“We were faced with the challenge of ensuring supply of petroleum products without the need for a subsidy regime. As of January 1 this year, the country is no longer paying subsidy, saving us a cumulative of over N1trillion in a one year period. That was the first major issue.

“Second major issue was that once the N600bn subsidy money was paid, the ability of marketers to import the product became a challenge because they could not raise letters of credit and up to this point that still remain a major issue.

“So even if they wanted to import, they needed letters of credit and adequate foreign exchange cover. Some of them were owing arrears of liabilities as a result of commitment I had made on petroleum importation prior.

“So, whatever money they had was taken by banks to offset certain obligations. Going forward now, they didn’t have money to import fuel again. What that meant was that by late August last year, we moved from the expected obligation of the NNPC to bring in 50 percent of the national consumption of about 45 to 50 million litres per day but we now have to cover a 100 percent platform because nobody was bringing in the product, the consumption was still static and we needed to cover the gap.

“We took up that challenge without increase in crude allocation, without any excess allocation as it were and we have to work exceedingly hard from August last year to cover the gap but we didn’t cover it 100 percent because we didn’t have the ability to do so. So, the gap we could not cover was responsible for the queues. That was responsible for the 80 percent of the problem.

“Third issue is that of pipeline vandalism. We met pipelines that were in comatose, for instance Mosimi was not working. This morning, after a three months intensive work with private partners, we just been able for the first time, to recover the Escravos to Warri pipeline and about a month ago,  we recovered the Brass to Port Harcourt pipeline. For the first time, we will be able to pump crude to the refineries without the need to use vessels which are extremely expensive which I stopped as soon as I came. For the first time in six years, we are trying to recover the pipeline.

“We have 18 depots across the country. 90 percent of them are not in a state of use. They have not been maintained. They have been abandoned for years. Money was needed to work on them. But we have advertised for joint partners to come in and work with us to put in the required facilities to get depots working and get pipeline repaired. But through hard work we have been able to recover some pipeline from Mosimi up to Ilorin but with a few punctured points. The crude pipeline from the South to the North again being recovered. The absence of the pipelines, makes movement of the products from Lagos  taking up to a week.

“Because the importers are not bringing in the product, the logistics of the NNPC had been expanded, creating great nightmare for us. Not only do we bring in the product but we also lighten it and take it to the storage tanks of the majors and some cases if you notice,  we also are taking intervention trucks and taken products into the stations of this individuals because if they do not sell and the stations are empty,  it is a challenge. NNPC basically over extended itself in terms of what it was set up to do and what it has the capacity to do.

“Lack of infrastructure too is affecting us because we are moving up to 3,000 trucks round the country everyday this is not the best way to circulate or distribute products in a civilised world but that is the only option that we had. NNPC was losing N40bn every month when we came but this had been reduced to N3bn by December last year. We met a company with a debt profile of N4trn and with that of NPDC which is about N1trn. The access to open up letter of credit continues to be a challenge.”

On diversion of products by marketers he said, “Marketers are diverting the product, some days we load 300 trucks from Lagos coming to Abuja and one third of that, are dissipated into areas where people could make quick returns and so they won’t get to Abuja. We do not have a computerized system that will enable us to track every truck that is loaded from our depots. We are however working on this; it has not been there for 20 years.

“We are currently working very collaboratively with the oil majors that is upstream producing companies to see how they can sell us foreign exchange for the naira components they would require for their local operations. When they bring in the foreign exchange, they give us the first call.  We are using that module to cover up the foreign exchange gap. We are also working collaboratively with the CBN within the limits of what it can tolerate to give us a little bit of foreign exchange.

“Additionally we also brought in the DSDP programme because the number of litres of consumption as a nation was spectacularly false. We were carrying figure of 55 million litres per day that was geared towards creating opportunities for people to make more money during the subsidy regime. We did analysis and we discovered that we were consuming 45 million litres which means that we are saving about 10 million litres per day.
“April begins the DSDP programme which will save us $1bn a year. This means that the contract upon which we were importing fuel in the past was extremely faulty. Once that begins from April 2, we have commitment of much more arrival of the product. That covers the 60 percent that our crude allocation can deal with. There is still that 40 percent gap which importers had got to bring in. That is being worked on through the collaboration of oil majors and the CBN.

“We are also setting up, for the first time, strategic reserves for the first time in this country of close to about two million tonnes to provide products always. That would be operational as from May. It would contain between five to seven cargoes of fuel as a reserve. Once we do that we should be away from the incessant fuel crisis that we have.

“We expect that between now and about the 6th to 7th of April, the fuel queues will disappear, the DSDP will begin and the foreign exchange allocation will see us smoothly through the track.

“The refineries will be working and the volumes they would be producing will be sent to the strategic reserves to address difficult times. In April we are expected to get to get 150 percent of the volumes that would be needed. A lot of that will go to storage tanks. Hopefully that should sort out the problem.”