Four days before a change of government, oil marketers negotiated an $800m payout from the federal government. In the afternoon of Monday, May 25, the Independent Petroleum Marketers Association of Nigeria agreed to deliver refined fuel products that it had been holding back, which is expected to put an end to a fuel shortage that has had massively disruptive effects on the economy and society.
At the weekend, motorists queued for many hours at petrol stations, after which they had to pay inflated prices to fill their tanks. Public transport, where available, got so expensive that many workers resorted to walking to and from work, sometimes for hours. The power supply was also affected, and this problem was exacerbated by the fact that it was difficult to obtain diesel to run generators.
Companies had the same problems – telecoms operator MTN reported that its coverage in some areas had gone down because it could not power its towers, and Guaranty Trust shut its branches early on Monday because it could not power them. Local airlines cancelled their flights, while international ones rescheduled in order to refuel outside Nigeria.
The oil marketers were claiming that they had not received $1bn in payments from the government. Finance Minister Ngozi Okonjo-Iweala denied this, but evidently relented on Monday by agreeing to pay over almost the entire amount claimed (the payout was reported by the Marketers’ Association – Ms Okonjo-Iweala’s office had no comment).
This fuel crisis took place during the very last days of the administration of outgoing President Goodluck Jonathan and his People’s Democratic Party (PDP): president-elect Muhammadu Buhari of the All Progressives Congress (APC) takes office on Friday, May 29. The payout further worsens the State’s fiscal profile, which has already been battered by the PDP’s poor administration over the past two years.
Poor administration is a generous assessment: it has looked all along as though the mismanagement in the petroleum sector has been abetted by Petroleum Minister Diezani Alison-Madueke, who is close to some big operators in the sector, including oil marketers. Ms Okonjo-Iweala has been unable or unwilling to hold firm against this cartel, and Mr Jonathan looks complicit as well. At the weekend the APC’s spokesman Lai Mohammed said that Mr Jonathan was “defecating on the chair he is vacating,” and said: “Never in the history of our country has any government handed over to another a more distressed country.”
Mr Mohammed may be exaggerating when he says the Nigeria that Mr Buhari will take control of is the most distressed in the country’s history: a few darker episodes in that history come to mind. But the state of Nigeria’s finances is dire. It will take some time for the new administration simply to take stock of what happened over the past two years, and even in the PDP government’s final weeks, after Mr Jonathan lost the March election and his cronies realised they were about to lose their place at the trough.
The scale of the problem should temper any expectations that the new president will be able to effect radical change in a short time. He will inevitably disappoint much of the electorate, especially if, as we expect, he will decline to prosecute corrupt officials in Mr Jonathan’s administration with the vigour that many Nigerians are hoping for. We remain optimistic that Nigeria will be cleaned up to an appreciable degree (even though that is a low bar to cross), but the oil sector is a serious mess and we should not expect miracles.
Real activity in the oil industry contracted by 8.15% y-o-y in Q1, mainly on account of a drop in crude oil output to 2.18 million barrels per day (bpd) during the first quarter from 2.24 million produced in Q1 of 2014. The non-oil sector continues to be the main driver of economic growth in Nigeria, with the construction, trade, telecommunications and agricultural industries all performing relatively well during Q1 this year.
Francois Conradie (Political Analyst) and Cobus de Hart (Economist)
