Nigeria’s financial capital Lagos is running on fumes again.
A fuel scarcity reached a climax this week with cars in lengthy queues clogging traffic, stoking tempers and dampening investor confidence in a top oil producing country.
Things got violent. Local newspapers reported paramilitary officers shooting dead gas sellers on the black market, as the Lagos state governor announced a ban on “indiscriminate queues”, a Kafkaesque attempt to get traffic flowing.
Hoping to beat the crowds, some spent the night in their vehicles waiting in the queue outside a filling station. “I slept in the car, in the back seat. I need fuel,” Kenny Giwa, a 26-year-old taxi driver, told AFP.
Giwa’s determination paid off. Just after dawn on Wednesday, his battered blue Volkswagen Golf was first at the gate of a station selling petrol for 86.50 naira (43 US cents, 38 euro cents) per litre.
But his victory will be short-lived. “If I buy today it will last two days, then I’ll queue again,” Giwa said with a sigh, “The price of the black market fuel is too much.”
Nearby, black market fuel hawkers stand holding pieces of hose and yellow jerry cans waiting for richer — or more desperate — drivers willing to fork over twice the amount of cash per litre to avoid the mind-numbing wait.
“We’re the largest oil producing country in Africa, this is poor management, greed and corruption,” said Muyiwa Oke, a pharmaceutical researcher buying black market gas for 250 naira per litre.
“The traffic is crazy. At half a tank I start looking. I don’t want to get stuck.”
– ‘Genuine financial distress’ –
Nigeria is no stranger to fuel scarcity. Despite its massive oil wealth, years of mismanagement have left state-owned refineries working at a fraction of their 445,000 barrels per day capacity, according to Bloomberg News.
Yet this latest round is particularly bad, a situation analysts attribute to the crash in global oil prices and President Muhammadu Buhari’s stubborn insistence on pegging the naira at 197 to 199 to the dollar through capital controls and import restrictions.
“The downstream marketers are probably in genuine financial distress right now,” Alan Cameron, a London-based economist at frontier markets firm Exotix, said.
With (Other OTC: WWTH – news) dollars in short supply, fuel importers are forced to go to the black market, where the naira is hovering around 220 per dollar. In the end, the importers end up paying the difference without any compensation.
In response to the fuel crisis, Nigeria’s Petroleum Minister of State Emmanuel Kachikwu wrangled a deal with international energy companies working in the country to provide about $ 200 million to help fund fuel imports.
“This is probably the most challenging issue since I took over,” Kachikwu said in a speech posted on his Facebook (NasdaqGS: FB – news) page Thursday, promising “by the second week of April we should be out of the queue situation.”
Still, he admitted, the $ 200 million “buffer” is not a long term solution.
– ‘Crucial turning point’ –
When Buhari was elected president last year, investors were bullish on Nigeria, emboldened by a peaceful transfer of power and the country’s strong GDP growth.
But now the low price of oil and Buhari’s unorthodox monetary policy has changed the outlook dramatically.
Oil accounts for two-thirds of Nigeria’s revenue and the low prices are putting pressure on the government. Meanwhile, propping up the currency is draining foreign exchange reserves.
The fuel queues are just one symptom of the failing economy.
“Nigeria is at a crucial turning point,” Anna Rosenberg, director of sub-Saharan Africa research at Frontier Strategy Group, said.
“It (Other OTC: ITGL – news) could muddle through this year with relatively low growth, but only if the government adjusts monetary policy and lets the naira devalue,” she said.
“The longer they refuse to do that, the worse it’s going to look.”
