The recent disclosure by the federal government that subsidy may finally go has got many Nigerian worried. In this report, BENJAMIN UMUTEME looks at the implications of such a decision on the citizenry.
When the Minister of State for Petroleum Resources, Timipre Sylva, first flew the kite of a probable hike in the pump price of fuel, many Nigerians were not only taken aback, but visibly angry that the government was talking about another fuel increase in the face of the current economic downturn.
Sylva did make it clear that with the upward trajectory in crude oil price, there was bound to be an increase in price considering that the country imports refined petroleum products due to its non-functional refineries. The former Bayelsa governor noted that the situation was inevitable given the new fortune of crude oil in the international market.
He said: “Since we are optimising everything, NNPC needs to also think about the optimisation of product cost because as we all know, oil prices are where they are today, $60. As desirable as this is, this has serious consequences as well on product prices. So, we want to take the pleasure and we should as a country be ready to take the pain. Today, the NNPC is taking a big hit from this. We all know that there is no provision in the budget for subsidy.
“So, somewhere down the line, I believe that the NNPC cannot continue to take this blow. There is no way because there is no provision for it. As a country, let us take the benefits of the higher crude oil prices and I hope we will also be ready to take a little pain on the side of higher product prices.”
And the national operations controller, Independent Petroleum Marketers Association of Nigeria (IPMAN), Mike Osatuyi, did not mince words when he said that following the rising price of crude, the pump price of petrol might rise to between N200 and N230.
“Nigeria has crossed the bridge, there is no hiding place, the N1.2 trillion, which was hitherto annual spending on subsidy, will be borne by the market. As it is, the prices of crude oil have gone up to $67 per barrel and, with this, the price of PMS will be between N220 per litre and N230 per litre,” he said.
The Petroleum Products Pricing Regulatory Agency (PPPRA) released a template increasing petrol price to N212 per litre, but the template was later deleted. Despite the clarification by state-managed Corporation and the assurances that there would be no increase, experts are of the opinion that fuel price hike was just a matter of time. And true to type, the government did not disappoint.
NNPC boss’ disclosures
Speaking during a ministerial briefing on March 26, 2021, at the Presidential Villa, Abuja, the Group managing director, NNPC, Mele Kyari, disclosed that with the Corporation spending N120 billion monthly to subsidise underpriced sale of petrol, it could no longer bear the burden of subsidy. For Kyari, it was about time the market price for petrol was implemented.
“The price could have been anywhere between N211 and N234 to the litre. The meaning of this is that consumers are not paying for the full value of the PMS that we are consuming and, therefore, someone is paying that cost. As we speak today, the difference is being carried in the books of NNPC and I can confirm to you that NNPC may no longer be in a position to carry that burden.”
What that means is that Nigerians might just be in for an inflation propelled economy.
The NBS revelation
The February 2021 CPI and Inflation Report as released by the National Bureau of Statistics (NBS) showed Nigeria’s food inflation surged to 21.79 per cent in February 2021, the highest rate recorded in Nigeria since October 2005.
Increases in the food index were caused by increases recorded in the prices of bread and cereals, potatoes, yams, and other tubers. Also, the increase in the prices of meat, food products, fruits, oil, and fats, vegetables, and fish contributed to the recorded spike in the food inflation rate.
For instance, selected food price watch data for February 2021 reflected that the average price of 1 dozen of Agric eggs medium size increased year-on-year by 15.62% and month-on month by 1.46% to N518.30 in February 2021 from N510. 84 in January 2021 while the average price of piece of Agric eggs medium size (price of one) increased year-on-year by 20.50% and month-on-month by 2.47% to N47.35 in February 2021 from N46.21 in January 2021.
The average price of 1kg of tomato increased year-on-year by 11.33% and decreased month-on-month by -7.07% to N269.18 in February 2021 from N289.66 in January 2021. The average price of 1kg of rice (imported high quality sold loose) increased year-on-year by 21.02% and decreased month-on-month by -2.57% to N537.37 in February 2021 from N551.57 in January 2021.
Similarly, the average price of 1kg of yam tuber increased year-on-year by 28.11% and month on month by
3.47% to N242.82 in February 2021 from N234.67 in January 2021.
For Bismarck Rewane, the managing director at Financial Derivatives, the “stagflation crisis” would take a long time to resolve, with inflation eating up economic gains to the point where any government stimulus might be too weak to generate jobs.
Experts’ views
In his view, a public affairs analyst, Kelechi Deca, said the level of inflation that would arise from fuel increase would mark the beginning of a long night of suffering for millions of Nigerians. According to him, the fear across the country is that there will be further spike in prices of goods and service, thereby worsening an already difficult situation. With the lack of an efficient transport infrastructure, the burden of any increase will be shifted to the final consumer.
What this means, according to Marcel, a distributor of house products, is that Nigeria should be ready to pay more for household goods and services including foodstuff.
He told this reporter that, “How I buy my goods will determine how much I will sell. My fear is that at the end of the day, we traders will witness a drop in patronage as we are bound to lose some of our loyal customers. For example, one of my customers who buys bread every day now buys just twice a week, there are even sometimes you won’t even see him in a week.”
Even the owner of a fashion outlet in the Federal Capital Territory (FCT), Peter Effiong, lamented the negative impact it will have on sales.
According to him, “If they increase fuel price, we are the one to continue suffering. Everything will increase in price.”
A civil servant in Abuja, Dahiru Usman, said many civil servants would be affected by further increase in petrol price.
In Lagos, Mrs. Kehinde Oni, a Lagos-based hair stylist, rejected the proposed move to further jerk the price of fuel, saying it would further deepen the woes of operators.
She said, “We also heard about the plan that petrol might increase again but this is not going to be funny. What this means that we would be spending more money fuelling my generator. Things are already hard. Why are we compounding things for us?”
A frozen food seller at Opebi area of Lagos, Mrs Michael Abiodun said she already spends N4,500 daily to keep her products refrigerated, lamenting that residents and business owners have been experiencing blackouts in the area for weeks.
The Organised Labour has criticised the federal government over the fresh move to increase petrol pump price.
Trade Union Congress (TUC), President Quadri Olaleye, wondered why the government is always in rush to increase fuel prices any time there is a rise in the price of crude oil.
“Why is it that the government is always in a hurry to implement an increase any time crude oil price rises in the international market? Last time when the price went down in the market, Nigerian government didn’t reduce the price of PMS. Besides, we are still expecting the report of the technical committee set up last time by February 22; why the rush?”
