Explainer: Petrol scarcity, diesel prices and a stubborn subsidy
A few weeks ago, it was petrol. As petrol retailers ran out of fuel, queues quickly formed in petrol stations across the country.
First, petrol importers shipped in petrol with too much methanol, rendering it unusable for Nigerian cars. Petrol stations closed temporarily, worried they had sold adulterated petrol, while motorists rushed to their trusted vendors. Then, unverified reports surfaced suggesting that Nigeria was not producing enough crude oil to satisfy its oil-for-petrol swaps with international refiners. With Nigeria unable to provide the crude, refiners held back their petrol.
Some takeaways:
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The recent energy crises show how economic policy in Nigeria is often stuck between a rock and a hard place. Subsidies are supposedly bad for the economy, but the alternative looks like an economic catastrophe.
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Petrol and diesel are fairly similar products, but one factor separates them: one is subsidised, and the other is not. While Petrol subsidies are inefficient and unsustainable, the diesel market shows what can happen if petrol prices are fully deregulated—they can double overnight.
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This highlights the Nigerian economy’s dilemma—our reluctance to make necessary decisions until they snowball into unmanageable situations. Unfortunately, it is a problem playing out across other sectors of the Nigerian economy such as debt and government finances.
Amid all of this, petrol stations have been accused of hoarding petrol as retaliation for the government reneging on its decision to remove the petrol subsidy.
All in all, finding unadulterated petrol at the official price has been a devilish task for Nigerians recently.
More recently, it has been diesel. As global oil prices soar to record highs—now flirting with the $120 per barrel mark, the first time
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