The week ahead – Tinder dry

The Nigerian National Petroleum Corporation formally became a commercial company on Tuesday, known as NNPC Limited. Minister Timipre Sylva said the move would deliver more profitability and accountability. As a commercial entity, NNPC Ltd will no longer have access to state funds. Its shares will be held by the ministries of petroleum and finance, who will decide which assets and liabilities to keep or transfer to the government. Sylva said NNPC Ltd will now operate as a profitable entity that would declare dividends. The Nigerian National Petroleum Company (NNPC) Limited then went on to approve an upward review in the pump price of petrol from ₦165 per litre to ₦179, effective Tuesday. NNPC, in a notice to fuel marketers, directed them to change the petrol price on pumps to the new price. This was even as the company equally increased the ex-depot price from ₦148.17 to ₦167 per litre. This came after weeks of petrol scarcity resurfaced across the country as fuel retailers were adopting different price bands to force unofficial deregulation attempts. Despite this, the NNPC’s Group Chief Executive Officer, Mele Kyari maintained that the determination of fuel prices would continue to be a federal government decision despite the firm’s transitioning to a commercial entity. Speaking during a Channels Television interview, Kyari said the NNPC’s function of being the sole importer may not have been on a commercial basis till date, but it would charge the government a fee for the service going forward.

This transition brings to mind the saying that “if you put lipstick on a pig, it’s still a pig.” There are many questions that need to be answered with regards to the NNPC’s new steps as a commercial entity. As it remains wholly owned by the government, what disclosure and transparency regime will it work under? Will Nigerians be better informed on how it runs or will its operations be shrouded in mystery? Will it operate a dividend-type system akin to the Nigeria LNG for remitting proceeds to government coffers? These and many more questions will need to be answered in the weeks to come. The NNPC is a behemoth which acts as both a regulator and a player in the upstream, midstream and downstream petroleum markets and is a major reason why there is widespread inefficiency and corruption in the sector. With the transition to NNPC Ltd and operating under the new Petroleum Industry Act, it is nominally supposed to be just another player. However, it is yet to fully shed any of its time-honed responsibilities, for example, with respect to fixing retail prices. Although the company’s spokesman denied that the NNPC approved the new pump price review, (ironically, on the same day as the new corporate launch) and stated that fuel pricing directly falls under the responsibilities of the new Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, it is clear that the Nigerian state remains committed to fuel price controls, albeit with variations. While the new price regimen reflects the necessary geographic variations, the basis for arriving at each price still appears arbitrary due to government dictat. Policymakers need to use this opportunity to make a clean break from history. As a result, some form of transitional financial support to low income families and dependent demographics such as college students can be instituted to cushion the effect of the price increases that deregulation would inevitably cause. The NNPC’s stated commitment to retaining management of petrol subsidies under its new look is contradictory and represents an unfortunate attempt to eat its cake and have it. The NNPC still owns the country’s four refineries, is the country’s sole petrol importer and sets retail prices. It simply has no basis for continuing subsidy management as it will effectively mean what should be just another industry operator distorting the market for everyone – players and consumers. If the President and the CEO’s comments about transforming NNPC to a Fortune 500 company are to be realised, this is not the way.

The management of Aero Contractors has announced the temporary suspension of its airline’s scheduled passenger services operations with effect from Wednesday, 20 July, attributing it to the impact of the challenging operating environment on its daily operations. But this would not affect the maintenance activities of the Approved Maintenance Organisation (AMO) otherwise known as AeroMRO, the Approved Training Organisation (ATO) also known as Aero Training School, and the Helicopter and Charter Services operations. The airline said on Monday that it took the decision because most of its aircraft are currently undergoing maintenance and this would hinder it from serving its customers efficiently. In industry related developments, airline operators have asked the Nigeria Civil Aviation Authority (NCAA) to implement a 25-40 percent fuel surcharge to be included in ticket fares, stating that this will enable airlines to manage troubling times and stay afloat. In a letter signed by the president of the Airline Operators of Nigeria (AON), Alhaji Abdulmunaf Yunusa Sarina, on 18 July, he detailed the extent of the cost of aviation fuel on airlines’ operations. The letter said that the price of Jet A1 (aviation fuel) had risen from ₦200 per litre in February 2022 to over ₦780 today, resulting in an over 130% increase in operational cost with airlines unable to increase fares. It went further to request an immediate review of the decision that airlines are required to obtain approval for an initial three months before implementing a fuel surcharge. It also sought a waiver of the demand that airlines pay an additional five percent on the fuel surcharge entirely separate from the five percent on ticket sales charge (TSC).

The heart of the matter is that the airlines, while saying they are unable to directly increase ticket prices, are requesting for an increase in another way – through the surcharge. It represents the roundabout way stakeholders attempt to solve problems in Nigeria without dealing with the fundamental issues. The core issue here is that Nigerian airlines largely appear to source fuel – depending on the operating year, either their biggest or second-biggest cost item – at prevailing prices instead of utilising hedged contracts as is the norm globally. A hedged contract where a fuel supplier and the airline agree on the predetermined price at which the airline will purchase aviation fuel, is an industry tool that is used to help manage price fluctuations while also ensuring supply. Critical to its utility in this instance is an abundance of fuel storage capacity to ensure fuel stock is available well in advance of demand. Alas, therein lies the hiccup – limited storage capacity has in turn limited the wide use of these contracts. Additionally, the Nigerian proclivity to control prices means the airlines are reluctant to overtly increase prices but know that state interventions will procure their wishes anyway. Notwithstanding, the country’s long dance with price control of petroleum products is on its dying embers. Not only has it scared investors away from the aviation sector, it has left the local refining capacity in tatters, deepening the supply and storage crisis that has left the players bold enough to remain operational in a deep quandary. Our view is that the price of things in the economy should be fully cost reflective, except for necessities like basic food, healthcare and primary education. Cost reflective pricing typically bakes in the inefficiencies that elevate those costs, incentivising stakeholders to either deal with them or sink. Distortions due to government intervention and control is what has propped Aero Contractors for years before an unsustainable debt burden forced the government through its bad debt asset manager to take it over, and in spite of it all, the airline is all but done now. We need to reorganise for incentives to align with outcomes.

Following the coronation of the notorious terrorist, Ada Aleru, as the Sarkin Fulani Yandoto by Emir of Yandoto Daji, Aliyu Marafa, the Katsina government and the state police command say Aleru remains wanted. The conferment of the traditional title on Mr Aleru has generated uproar in the country. Shortly after the coronation ceremony, the Zamfara government suspended the Emir and dissociated itself from the decision to make Aleru the leader of all Fulanis in the emirate, as the title suggests. In 2019, Katsina police placed a ₦5 million bounty for anyone who provided information that would lead to Aleru’s arrest as he is believed to have led a 2020 attack on Kadisau Community in Faski Local Government Area, killing 52 residents. He said the attack was to protest his son, Sulaiman’s arrest. Aleru was declared wanted for crimes that include culpable homicide, terrorism, armed robbery and kidnapping in the state. Speaking to BBC Hausa on Tuesday morning, Katsina Governor Aminu Masari said he was surprised that an emir in neighbouring Zamfara conferred a traditional title on the terrorist. He said he tried reaching out to his counterpart in Zamfara, Bello Matawalle, but was not successful. Katsina and Zamfara share boundaries on two sides; Zurmi – Jibia and Tsafe – Faskari. Tsafe – Faskari is where Mr Aleru operates and attacks communities in both states, especially those on the state line. The police in Katsina said the million naira bounty was still in place “because the people of Katsina have not forgotten his atrocities.”

The scandal arising from the title conferred on Aleru highlights the lack of coordination between the governments – federal and state – saddled with addressing the entrenched nature of banditry. Somewhat paradoxically, it offers interesting insights into understanding the problem of insecurity in the North, and Nigeria in general. For one, there is the maximum exposure of the feeble effort put in by the government to curb insecurity. The corollary to this are the actively subversive efforts of government institutions to scuttle any sustainable effort at law enforcement. While Aleru was wanted in Katsina, he was receiving a traditional title from an emir next door in Zamfara. While Zamfara’s reaction to the uproar has been swift and decisive, its hypocritical nature must also be pointed out as the turbaning was attended by top government officials including a representative of the state deputy governor, the internal security commissioner and the local government chairman. Serious questions need to be asked of Governor Matawalle: does he claim ignorance of his own deputy governor and commissioner effectively blessing the turbaning? Or is this part of a different approach to solving the banditry challenge through non-kinetic action and co-opting a wanted bandit leader? Unless there is synergy between the various state governments, bandits will continue to run rings around them and adapt their methods. Having said all this, we must give some credit to the Zamfara state government. In the past year, it has deposed three emirs after due process found them guilty of collaborating with terrorists. They still represent baby steps but ultimately, the response to this coronation is important for crime fighting – zero tolerance for such actions will form the groundwork for whipping recalcitrant monarchs into line. However, this is the bare minimum that it can do. Zamfara has a responsibility to ensure that the Katsina police’s “wanted” notice for the terrorist does not end up forgotten on billboard notices and newspaper pages. The hard work of following up on stringent measures more often than not is left to people with little motivation to see it through which perpetuates the status quo. It is a major gap that Nigerian officialdom and law enforcement has to address.

A clash between some bandits and a splinter Boko Haram sect, the Ansaru terror sect, has left two locals dead, the Punch reported. The Chairman of the Birnin Gwari Emirate Progressive Union (BEPU), Ishaq Kasai, who said this in Kaduna last Friday, said some bandits on motorbikes attacked Damari, Kazage ward in Eastern Birnin Gwari Local Government Area of the state, killing two residents. Kasai also said the attack, which happened on Wednesday, left shops, vehicles, as well as a private hospital, burnt. According to him, the clash between the two terror groups lasted for more than two hours with the Ansaru, with superior firepower overpowering the bandits, who also wielded sophisticated weapons. The development led to the locals applauding the efforts of the Ansaru terror group for saving them from the bandits’ attack. The BEPU chairman said the terror groups’ clash forced hundreds to flee their communities.

Turf wars are a major feature of gang violence in Nigeria and this latest clash is no exception. In October 2021, Ansaru clashed with a bandit group in this part of Kaduna over ideology and operational tactics. For years, security experts have warned that the continued banditry in the North-West was going to provide the right environment for Islamist jihadist groups such as Ansaru, Boko Haram and ISWAP to crossover and expand. This has now reached an inflection point where Ansaru is starting to lay down the law and defend Muslims from bandit attacks. The bandits flouted an Ansaru order prohibiting them from attacking Muslins, setting up a violent confrontation that left about 30 bandits dead. If Ansaru are able to establish themselves as the dominant force in the area, they could win more support, as locals will consider them the lesser evil. It is not exactly clear, asides turf wars, what the cause of the latest clash is, but it harks back to a similar state of affairs in the North East which saw running battles between the JAS and Islamic State-backed Boko Haram faction over ideology and territory. What is telling, even more dangerously, is the approval ratings of the group in areas it controls, which, in the first place, comprehensively debunks the government’s claim that no territory is held by terrorists; and secondly, complicates its counterinsurgency plans, of which local support (of the populace) is a critical factor. The abandonment of state functions and responsibilities has more ungoverned spaces that are now being managed by groups with state ambitions. Worse still, the government does not appear to have a clear counterinsurgency plan for the North-West, which is worrying considering the proximity of Birnin-Gwari to Abuja (about a 5-hour drive). This means that these terrorist groups are likely going to try to extend their networks to areas closer to Abuja, joining up with cells and units already presently close to the capital. The lessons, which have been offered innumerably, have not been heeded and there is a likelihood that the same mistakes will keep happening across board, leading to the balkanisation of the Nigerian state and its territoriality. The alarm bells are well and truly ringing.