Fuel price deregulation: Nigerians groan over suffocating economy

Penultimate week’s hike in the pump price of Premium Motor Spirit (PMS) popularly known as petrol may have further dashed the expectations of millions of Nigerians for respite from the biting economy in the country.

In what turned out to be the latest in the series of price hikes since July, fuel marketers a fortnight ago raised the pump price of the product over claim of increase in the ex-depot price.

Before now, Nigerians had lamented and carpeted the government for what many described as the failure of the current administration to live up to its many promises of easing the pains of the people, particularly the downtrodden.

Some Nigerians who spoke to Sunday Sun expressed their frustrations at the inability of the government to come up with policies that will help to ameliorate the suffering of the masses rather than those which they claim, aggravate the plights of the people.

In particular, they deplore the timing of the latest hike in the price of petrol, describing it as a sign of the insensitivity of the government to their predicament.

Mrs Margaret Osezele, CEO, Triumph Agro & Allied  Products Ltd, pointed out that no government that has the interest of its people at heart would ever contemplate such harsh decision at a time when the people, she said, had been totally and thoroughly trounced and pauperized by a number of anti-people policies introduced by the government in the past few months.

“Thankfully, the NLC has signified its intention to engage the government on this issue. I hope the government will listen and reverse its decision. Most parents can no longer afford to feed their children anymore because of the high costs of food items in the country. People are losing their jobs in droves. Those who are lucky to still retain theirs are not getting paid. The government must act now to help and save the people from hunger and also to rescue the nation from hunger-induced unrest.” she said.

The Petroleum Products Marketing Company, a subsidiary of the Nigerian National Petroleum Corporation (NNPC) had two weeks ago announced that the ex-depot price of petrol had been increased from N147.67 per litre to N155.17. Following the announcement, the Independent Petroleum Marketers Association of Nigeria (IPMAN) said the implication was that the pump price of petrol would range from N168 to N170 per litre.

Prior to the increase, Nigerians had complained over the rising cost of living which economic experts had blamed on the high cost of transportation occasioned in particular by the series of petrol price hikes since the government went for broke with the deregulation of the oil sector.

Government’s decision to go ahead with further hike in price of petrol at a time when the price of crude oil was said to have declined has continued to attract flaks from many who expressed the view that Nigerians deserved better treatment from the government.

A business development expert, Mr. Tony Ashana, described the latest hike in price of petrol as befuddling, saying that the move accentuates government’s inconsiderateness to the suffering of the masses.

“I cannot really fathom the rationale behind the latest increase in the pump price of petrol because what we were made to believe is that it is the forces of demand and supply at the international market that would determine the price of the product once the oil sector was deregulated. Based on this assumption, what I expected was a reduction because we were told that the price of crude oil has declined at the international market. But with this increment, it shows that the government is insensitive to the plights of the masses,”

Curiously, the government had equally openly admitted the negative effect of the hike in petrol price on the economy.

At a virtual consultation and stakeholder engagement on the economic and fiscal policy drivers underpinning the Finance Bill 2020, the Minister of Finance, Budget and National Planning, Zainab Ahmed, had blamed inflation rate in Nigeria on the cost of transportation.

Another major sign of more troubled days for Nigerians emerged last week as the nation’s galloping inflation rate which has been on the upward  trajectory since last year, hit an all-time high of 14.23 per cent in October, 2020 (year-on-year) from 13.71 per cent in September, 2020, according to latest figures released by the National Bureau of Statistics (NBS).

The NBS which released the country’s latest inflation figures on its website last Monday, said that the increase of about 0.52 percentage points was higher than the rate recorded in September 2020.

It explained that the increases were recorded in all Classifications of Individual Consumption According to Purpose (COICOP) divisions that yielded the headline index.

According to the Bureau, the October figure stands as the highest inflation rate recorded by Nigeria over the past four years.

This is also coming amid outcry by the citizens that prices of basic food items have risen astronomically high in the country due to the effect of the COVID-19 pandemic and rising transportation cost following previous fuel price hike by the Federal Government.

Analysts are unanimous in their opinion that the development does not bode well for millions of Nigerians who are already struggling to survive.

The implication, according to them, is that the noose may have been tightened further around their necks, leaving them on the verge of being strangulated.

They maintained that the only solution to petrol pricing and deregulation conundrum is to accelerate the process of domestic refining of petroleum products and the creation of a competitive market framework.

Speaking on this, Dr Muda Yusuf, DG, Lagos’ Chamber of Commerce and Industry  pointed out that a deregulated pricing regime was typically volatile, oscillating with global oil price.

He added that deregulation without competition would not produce the desired outcomes.  “We are still immersed in a monopolistic structure even as we claim to have deregulated the petroleum downstream sector.  The economy and the citizens cannot get the benefit of deregulation under the current arrangement.  The NNPC is still a monopoly in the supply of petrol. Private sector players in the sector have no access to foreign exchange to import petrol and the refineries are still comatose. Government needs to urgently put appropriate structures in place for the deregulation regime to achieve its objectives.  There should be a level playing field.

“Otherwise, the deregulation policy faces a major risk of being derailed. If this happens, we would be back to the subsidy regime with all the attendant inefficiencies and corruption”, he posited.

To cushion the effects of petrol price increases on domestic prices, the LCCI boss suggested that there was “an urgent need to scale up investment in mass transit transportation systems.  The power sector recovery programme should also be accelerated to reduce the dependence of MSMEs on petrol powered electricity generators. These two areas of intervention would reduce the adverse impact of petrol price volatility on small businesses and the welfare of the citizens.”

Also reacting to the development, the Director General, Nigeria Employers Consultative Forum, Timothy Olawale, urged the government to demonstrate a high level of transparency in the deregulation process, saying only a deregulation system that inspires confidence among Nigerians would go a long way in assuaging the concerns as being expressed.

According to Olawale, “while we urge a total deregulation of the downstream oil sector, with market forces determining the price of PMS, it is imperative that government demonstrates a high level of transparency in the deregulation process. A deregulation system that inspires confidence among Nigerians will go a long way in assuaging the concerns as being expressed by Nigerians. The expected savings from deregulation should be ploughed into infrastructural development that will quicken economic recovery and elevate millions of Nigerians from the poverty line.

“We implore the government to, as a matter of urgency, fast-track the implementation of all pro-poor policies to cushion the effects of COVID-19 and EndSARS protest on businesses and the generality of Nigerians.”  (Sunday Sun)