The latest hike in the prices of the premium motor spirit(PSM), otherwise known as petrol, by the Nigerian National Petroleum Company Limited(NNPCL), is another bitter pill slurped down the throats of Nigerians. The hike, the second within a month, is an anti-climax.
The irritable, inconsistent oil sector price regime management has continued to erode and corrode the living conditions of Nigerians, mucking up their disposable income and family budgeting calculations.
The national oil behemoth had from last Wednesday jerked up the prices of its stock from Dangote Refinery for between N998 per liter in Lagos and N1,030 per liter in Abuja, up from N897. The hike represents N133 or 14.8 per cent increase. It, however, sold up to 1,050 in many retail outlets in Lagos.
The NNPCL had on September 3, raised the prices from between N568 per liter and N617 per liter to between N855 and 897 per liter, depending on the location. The September 3 hike was widely believed to have been connected with a debt overhang of N6.8billion.
The latest hike was a disappointing somersault because Nigerians were actually expecting a reduction in the prices of the Dangote fuel based on the off-taking deal which the NNPCL struck with the Dangote Refinery. Under that arrangement, NNPCL was to buy fuel exclusively from Dangote Refinery and resell to the oil marketers at a subsidized rate, especially if the Dangote price was higher than the prevailing market rate.
However, after the historic rollout of Dangote Refinery’s PMS on September 15 and NNPCL took the first stock from the refinery, the oil national giant released a new price template. The fuel was to sell in Lagos for N950:22 per liter and N922:22 per liter in Abuja. There were also price differentials in other city capitals. The price regime was about N100 higher than the prevailing market price from NNPCL’s retail outlets and other major stations.
Eye- brows were naturally raised because the price template then was a morale dampener. Nigerians had awaited the Dangote fuel with bated breath and invested so much hope in the billionaire’s enterance into the oil fray. So,their expectation was heightened that Dangote’s PMS would come cheaper and bail them out of the punishing spell of debilitating scarcity.
An NNPCL official had,however, explained the rationale behind the price template. He said neither NNPCL nor Dangote Refinery fixed the prices; that they(prices) were now being determined by market forces.
He had clarified further that the price template was high because the crude oil which Dangote Refinery used to refine the fuel then was paid for in dollars. He said from October1, the crude supplied to Dangote and products taken by the NNPCL would be paid for in naira.
In effect, the new price regime released now was supposed to be cheaper than the last one going by the off-taking deal. However, that was not to be because NNPCL has pulled out of the arrangement.
An oil dealer explained that the implication of NNPCL’s pullout from the off-taking deal is that the company has completely stopped subsidizing its purchases from Dangote. The national oil giant, according to the dealer, can no longer sustain the subsidy payment. The downstream sector of the petroleum industry, in essence, is now completely deregulated and oil marketers are now free to buy fuel directly from Dangote Refinery on a willing to sell, willing to buy arrangement.
This is a thorough let down. Complete deregulation of the oil industry that will leave fuel prices to flounder helplessly against the headwinds of unpredictable market forces is quite irksome, especially with the highly unstable naira value.
Effecting it at this period when most Nigerians’ purchasing power has been plummeted almost to the lowest ebb is vacuous and incautious. It is calamitous because it will plunge the already frazzled larger population into further misery.
That is precisely the argument of the Director, Center for Promotion of Private Enterprise, Dr. Muda Yusuf, who described the latest price increase as “regrettably ill-timed”. He said the hike failed to take the prevailing economic conditions into consideration.
“There is always a place for political economy in the interest of the vulnerable segments of society. The Nigerian economy is not ripe for full-blown deregulation and principles on all fronts,” he posited.
The Director-General of the Manufacturers Association of Nigeria(MAN),Segun Ajayi-Kadir, toed the same line. He said the hike does not bode well for the average Nigerian whose disposable income continues to shrink, drastically whittling down their purchasing power and in the face of increasing transportation costs.
The MAN boss said the latest hike would further drive up the costs of production for the manufacturers. “The second increase in one month,” he bemoaned, “will send high costs across the value chain for the manufacturer.”
“In terms of the distribution of our products, it means that we are going to pay much higher for it and this of course will impact the prices at which the produced items will go… Together with the fact that the disposable income of the average Nigerian has dipped, we are likely to witness a further dip in our sales figures,” he added.
The Nigerian Labour Congress(NLC), in a huffy response, demanded an immediate reversal of the fuel hike. A statement signed by its National President, Joe Ajaero, lamented the harrowing effects the impetus increase would have on the workers.
“It will further deepen poverty as production capacities dip, more jobs lost with multidimensional negative effects. In the light of this, we urge the government to immediately reverse this rate hike as precious increases did not produce any good results. People only got poorer,” the NLC said.
Already, prices of goods, especially food items, and transportation costs have begun to soar, as inflation is already stalking the latest hike. For example, as at Saturday, a bag of yam flour, which sold for N400,000, is now selling for N550,000. A full bag of rice, which sold for N80,000, has been increased to N100,000.
Similarly, a 100 kg bag of ‘honey’beans, which went for N130,000, now goes for N140,000. The same quantity of other types of beans are now being sold for between N120,000 to N130,000, depending on the location.
The influential Financial Times, in its July17,2024 edition, even before the last two fuel hikes, returned a damny verdict, dripping with caustic but hard facts, on the Nigerian situation. In the analysis, it said President Bola Tinubu, in his nearly 15 months in power, had “forced his 220 million fellow Nigerians to swallow some bitter medicine.”
It added: “He removed a generous fuel subsidy, one of the few benefits citizens received from their inefficient and corrupt state. He allowed the country’s currency, the naira, to enter free fall, fueling imported inflation and triggering the worst cost of living crisis in a generation.
“These measures have pushed tens of millions of already impoverished people deeper into misery.” Financial Times, however, argued that those policies were necessary “to begin correcting the country’s long-term economic budget.”
Many of the top notch publication’s admonitions ally with many of our positions on the state of the nation in some of our past editorials. For example, the paper said the political leaders who have been asking Nigerians to be patient must convince Nigerians they are in it together by also making sacrifices themselves.
“The president,” it said, “must chart a course ahead and convince Nigerians they are in it together. For that to be remotely credible, the political class must make sacrifices. Out must go lavish pay rise for civil servants and flashy cars(not to mention jets) for government officials…
“Likewise, some saving from the fuel subsidy should be redeployed to support the most economically vulnerable as a priority. Hunger levels are soaring and millions of children are foregoing meals and school.
“Nigerian politicians love to be seen handing out bags of rice. But what is needed is direct cash payments to people’s phones, the technology for which exists and in the long-term a proper safety net.”
We cannot agree more. We urge the authorities to rejig their fiscal operations, cut unnecessary costs and wastes in many areas. This is to recoup substantial funds, which should be ploughed into resuming the NNPCL’s off-taking agreement with Dangote Refinery.
The government must continue to subsidize its stock of PMS from Dangote Refinery till the crude-sale-in-naira begins to yield sufficient dividends. The expected gains from the historic local refining must be allowed to cascade down to Nigerians.
This is the least the authorities owe Nigerians. They must be sensitive enough to appreciate that fuel is about the only commodity whose vagaries, positive or negative, impact all Nigerians and virtually every stratum of our national life.
The government must,therefore, resist the temptation of the cheap economic gains to leave fuel prices at the mercy of the unpredictable and inscrutable vagaries of market forces. No sacrifice is too much to make to make Nigerians enjoy a modicum of relief from a guided subsidy. Government exists for the people and not the other way round.
