The Burden of Delivery
Effective and efficient distribution of petroleum products have remained a major concern of successive governments in Nigeria.
Pipelines are about the best means of moving petroleum products closer to end users. Unfortunately, most of the oil pipelines in the country are either dilapidated or damaged through vandalism. Consequently, the products are transported and distributed by trailers and tankers, a situation that has turned petroleum products’ delivery to a burden. And the burden of the product delivery translates to extra costs borne by the end users.
Retail prices for petroleum products differ from state to state in Nigeria, according to the National Bureau of Statistics (NBS). End users in states where the tankers have to travel longer distances pay more compared to states with short distances. The situation should have been ameliorated if the country’s 4 national refineries were working perfectly and the network of pipelines were in good condition.
As at July 2019, people residing in Kwara, Ondo and Ebonyi paid N146.67, N146.47 and N146.43 respectively for every litre of gasoline consumed compared to states like Kogi, Katsina and Abuja which are classified as the states with the lowest average prices of N143.00, N143.00 and N142.50.
“Moreso, the burden of petroleum products distribution in West Africa became worsened by the poor performance of the domestic refineries, which resulted in excessive dependence on product importation.”
The irony is that people living in poorer states pay more for fuel in Nigeria. Data from the National Bureau of Statistics show that Ebonyi state has a poverty rate of 82.7% which makes it one of the poorest states in the country while Kwara and Ondo states’ poverty rates are 72.1% and 57.7% respectively. In all these states retail price of fuel is well above the recommended retail price on N145 per litre of Premium Motor Spirit (PMS).
Similarly, diesel, states with the highest average price include Borno (N258.89), Niger (N243.75) and Kwara (N243.00) while states with the lowest average price of diesel are Rivers (N204.06), Plateau (N202.00) and Bayelsa (N195.00). Comparing the highest and lowest states with diesel price, there is a difference of about N63.89. This implies that end users in some states pay extra N63.89 for every litre of diesel consumed without any change in the quality of the product.
The situation also impacted cost of transporta-tion. Average transport fare paid by commut-ers for bus journey within the city increased by 7.06% month-on-month and by 15.13% year-on-year to N195.76 in July 2019 from N182.84 in June 2019. Similarly, the average fare paid by air passengers for specified routes single journey also increased by 0.32% month-on-month and by decreased by -4.54% year-on-years to N30, 562.97 in July 2019 from N30, 464.86 in June 2019.
Similarly, many of the West African countries with low per capita income pay more for petroleum products. According to Statistics Times report, countries like Burkina Faso (per capita income of $734), Guinea (per capita income – $865) and Mali (per capita income – $892) paid between $1.14 and $1.24 for every litre of gasoline. Nigeria with capita income of $2,050 pays $0.40 for every litre of gasoline.
The differences in prices across West African Countries is mainly due to the various taxes, subsidies and the “burden of Delivery”. The poor state of refineries has made the situation worse resulting in excessive dependence on product importation. Additionally, there was limited inflow of investments into the downstream due to low margins, regulated pricing structure and poor incentive mecha-nism.