Petroleum product scarcity: a review of the supply and distribution of petroleum products in Nigeria

Osi S. Akpoghomeh and Dele Badejo

OPEC Energy Review, 2006, vol. 30, issue 1, 27-40

Abstract: Nigeria ranks high among the comity of oil producers both at the world level and among the OPEC eleven. It is, therefore, paradoxical that the supply of all petroleum products is erratic and has declined sharply in the recent past. This paper thus reviews the petroleum product supply and distribution systems in the country to ascertain the extent to which the system may have contributed to the present product scarcity in Nigeria and, by extension, identify the causes of the present regime of petroleum product scarcity. The paper observes that the network density and connectivity of petroleum product distribution pipelines are low and both indicators consequently show the inadequacy/deficiency of the network in ensuring an efficient distribution system. The supply mode, on the other hand, has, over the years, demonstrated its inability to guarantee adequate supply due to factors including sabotage, vandalism, banditry and poorly maintained infrastructure. Further, the federal government and the major and independent marketers could not sustain the importation of petroleum products because of the shortfall between the landed cost of imported products and their selling prices in Nigeria, which made the business unprofitable. Finally, the paper examines the withdrawal by the federal government of subsidies on the price of petroleum products consumed locally. All the above factors together occasioned increases in the cost of products. In conclusion, this paper supports the call for the privatization of refineries and the depot/pipeline system as a viable option to end the supply problems.

Date: 2006
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