Nigeria fuel shortages hit MTN, Guaranty Trust bank

Severe fuel shortages in Nigeria hit the services of Africa’s largest mobile telecoms operator, MTN, and force Guaranty Trust Bank to close its branches nationwide at lunchtime, the companies say.

LAGOS, NIGERIA (MAY 25, 2015) (REUTERS) – Chronic fuel shortages in Nigeria have severely disrupted telecommunications, banking and aviation on Monday, just days before Muhammadu Buhari’s inauguration as the president of Africa’s biggest economy and top oil exporter.

Mobile phone services have been hindered, banks are closing early and planes have been grounded because fuel is needed to power the private generators that produce most of the electricity used by the country’s 170 million inhabitants.

Telecommunication giant, MTN, which had nearly 60 million users in Nigeria in 2014 – about 27 percent of its entire subscriber base across 22 countries – making Africa’s most populous country its biggest revenue contributor, also sent out messages to its subscribers on the biting fuel crisis, saying they were trying everything possible to make sure it does not affect services.

The fuel crisis began in early March when slumping oil prices and an impending general election sent the local currency to record lows, hitting importers who have struggled to open letters of credit with banks.

Africa’s biggest crude producer subsidises gasoline heavily and depends on imports for the bulk of its domestic fuel due to inadequate refineries.

The gasoline importers say they are owed money from the government and have shut depots until their demands have been met.

Petrol originally sold at a subsidized rate of 87 naira per litre is now sold for as much as 600 naira per litre, an over 600 percent increase, yet it is not available.

In the commercial hub of Lagos, the usually gridlocked streets were relatively clear during the Monday morning rush-hour because many drivers had run out of petrol.

Some drivers resorted to buying black market fuel for 500 naira ($2.53) per litre, more than five times the 87 naira per litre subsidized price. ($1 = 198.0000 naira).

The few buses on the road have tripled their fares.

For some, the shortage has created a lucrative business opportunity.

“I have sold three 30-litre cans of fuel today at 12,000 naira each,” said Samaila, one of the street petrol sellers.

Others are frustrated by the petrol shortage and the inconvenience it’s caused.

“They are selling it at 600 naira per litre, it’s outrageous. So I expect a solution in the next few hours because by next three days this thing will be…. I don’t know how to say it,” sighed Gbenga Forotimi.

“I stay down Ikorodu, for me to come from Ikorodu I left as early as 5 (am), look at me, this is almost 10 (am), five hours on the road. The day is off and the money is too much, the cost of coming is too high,” said Oriola Sampson, a civil servant who works with the Nigeria Ministry of Education.

Nigerian economist Bismarck Rewane warned the impact of the petrol crunch could be costly for the country.

“When you put everything together, by the time MTN shuts down its base stations, by the time Arik and others cancel all their flights and you can’t move, by the time tanker drivers, the trailer drivers as well moving the food cannot move their food, the markets are shut down, goods are shut down, people cannot move, investments are affected, the ATMs are not working because you cannot draw cash,” Rewane said.

“The total impact could be as much as 5 billion dollars a day,” he added.

Efforts by outgoing president Goodluck Jonathan in 2012 to end expensive subsidies, which would have doubled gasoline prices, led to riots in the street.

The steep drop in world oil prices would have cushioned consumers from any withdrawal of subsidies, but gasoline prices would still jump by roughly 30 percent if the current capped price of 87 naira per litre is allowed to move closer to the 115 it would cost without the government support.

Additionally, as subsidies cover the difference between the capped price and the cost to buy the fuel on the international market, marketers worry Nigeria could end the payments without letting capped prices rise, leaving them to shoulder the potentially sizeable price difference.

“The subsidy has to go, so nobody is paying 87 naira a litre right now and everybody is inconvenienced. So this is the right opportunity to take out the subsidies, put the matter to rest and take out the subsidy system that actually creates this absurdity, this fraud, because these guys are blackmailing the country as a whole, and that cannot be accepted,” said Rewane.

Nigeria relies on oil exports for 80 percent of its revenue and has already burned through half of its borrowing allowance this year.

It could follow Angola and Indonesia in cutting expensive subsidies, but with crude prices now edging back up after last year’s slump, the most ideal moment may well have passed.

Though Nigeria exports around two million barrels per day of crude, it is almost wholly reliant on imports for the 40 million litres per day of gasoline it consumes, due to inadequate refineries.