…Pump price increase inevitable – FG,…Reasons given for price rise not new – NLC, …It’s negative impact’ll be huge, immediate – Expert,‘…Ruling class insensitive to masses’ feelings’
There have always been controversies whenever plans to hike the price of fuel are announced, and the latest confusion has not been different. In this report, BENJAMIN UMUTEME and BENJAMIN SAMSON take a look at the implications of another fuel price hike in these austere times.
Price rise
From the military regimes of Yakubu Gowon, Olusegun Obasanjo, Ibrahim Babangida, Sani Abacha, and Abdulsalami Abubakar, to the civilian administrations of Ernest Shonekan, Obasanjo, Goodluck Jonathan and now Muhammadu Buhari, it has been hike from one pump price of fuel to another. Records have shown that only the late President Umaru Musa Yar’Adua rather than hike fuel price reduced it from N75 to N65.
Since the turn of the year, when the price of crude oil in the international market picked up, experts have said that it was only a matter of time before the federal government increased the pump price of petrol.
With the nation’s inability to refine its crude due to non-functional refineries, analysts over the years have continued to insist that it would be difficult for Nigerians to enjoy the benefits of an oil-producing country, especially with the volatility of the oil market. And it did all begin to get clearer especially with the marginal increases that were implemented last year.
With prices of oil still on an upward trajectory since the beginning of 2021, there were fears that a price increase was in the offing, but no one expected that it would be with such a wide margin.
Sylva’s disclosures, admonition
It came as a surprise to many Nigerians when the Minister of State for Petroleum Resources, Timipre Sylva, said on February 9, 2021, at a public forum that Nigerians should prepare for a higher regime of pump price of petrol.
According to the minister, the situation was inevitable given the new fortune of crude oil in the international market.
“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,” he said.
In the 2021 budget as signed into law by President Muhammadu Buhari, no provision was made for fuel subsidy. To further rub this in, the executive secretary, Petroleum Equalisation Fund (PEF) management board, Ahmed Bobboi, revealed at the 21st Annual General Meeting (AGM) of the National Association of Road Transport Owners (NARTO) that the federal government was planning to increase the cost of transporting (freighting) Premium Motor Spirit (PMS) also known as petrol by 20 per cent.
The surge, which will see the price jumping from N7.51 to N9.11 per litre in the pricing template of Petroleum Products Pricing Regulatory Agency (PPPRA), will lead to a hike in the retail price of the product across the country.
Presently, the price of Brent crude has been hovering close to $70 per barrel. And toeing that line, the national operations controller, Independent Petroleum Marketers Association of Nigeria (IPMAN), Mike Osatuyi, hinted that following the rising price of crude, the pump price of petrol may rise to between N200 and N230.
Osatuyi declared that the whole nation had crossed the bridge and that there was no hiding place for a hike in fuel price.
He said, “There is no hiding place, the N1.2 trillion, which was hitherto an 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.”
In a chat with Blueprint Weekend, the organising secretary of Socialist Workers and Youth League (SWL), Adejobi Peter, said the proposed increase of petrol has shown that the ruling class is insensitive to the feelings of Nigerians.
“The proposed increase in fuel is just to tell you that the ruling class we have is not humane. They do things with impunity that is why they don’t know that upon the pain and hardship brought about by Covid-19, you are still going to create more pain by increasing pump price,” he said.
With the Naira continually being battered by the dollar, many say there is no way out of the present predicament. Analysts opine that the impact on the economy as a whole will be immediate if the proposed increase of petrol to between N213 and N220 is allowed to stand.
At the parallel market, the Naira present goes for about N480 to a US dollar.
Experts’ views
A development consultant, Jaye Gaskia, told Blueprint Weekend that the impact it is going to have on the economy, on inflation, on the cost of living of Nigerians is going to be huge and immediate.
He said, “The increase will be very huge! When you look at the so-called deregulation of the sector, the way prices have been increasing it’s been marginal increases. Maybe you’ve had like N3, N5; I think the most significant was like N7. This is huge; it’s going to be like N40 – N50.”
He noted that with the refining, cost of refining and the value of the country’s currency out of the government’s control, it would be difficult to put a stop to the upward moment of petrol price.
“Looking at it from all perspective…, this upward trend of price increase will continue for the foreseeable future.”
Similarly, the deputy president of the Nigeria Labour Congress (NLC), Joe Ajaero, described the reasons being canvassed by the government for the proposed increase of petrol price as “an old story.”
Speaking on Channels TV’s Sunrise Daily, which was monitored by our reporter, Ajaero noted that the increase in the price of crude at the international market should not translate into higher petrol price.
“If we sell our products at a higher price how does it translate for us to suffer? Instead of Nigerians laughing, it’s now becoming a source of punishment.
“By the time you fix prices of these products these products based on forex and maybe inflation you are creating a vicious cycle because if we increase by March inflation rate will go high as a result, foreign exchange will go high and by the month of April you now review and you discover that it has gone up and you see that you need to increase again.”
In a telephone chat with our correspondent, a political economist, Olamilekan Folarin, noted that any increase in fuel price will deeply aggravate the problems of transportation, food price, and others.
“It is ridiculous that the present government that paid lip service to building refineries would rather choose to engage in the unproductive exercise of waiting for the private sector. Meanwhile, the PIB that would have partly addressed issues in the sector is being sprayed with political delay tactics,” he said.
Nigerians react
Speaking with our reporter, a lawyer, Ibrahim Babajide, said: “Increase in pump price of fuel affects the masses more. While the government spoils the business class, in terms of reliefs, harsh economic measures are heaped on the masses.
“It shows this government is anti-ordinary and pro-rich. The masses cannot survive, unless they organise and resist through peaceful mass actions.
“Almost on a daily basis, our government is dishing out policies that add to the existing pains in the land. From VAT increments to hike in electricity tariff, deliberate devaluation of the naira and now a monthly increase in the price of petroleum products.
Also speaking, a food transporter in Abuja, Mrs. Rhoda Njoku, said the cost of transportation has hindered her from going to the East to buy foodstuff to sell in Abuja.
She said, “I will no longer risk my life for the food items business due to the cost of hiring buses and other risks involved.
“Before now, with N300, 000, I could gain N150, 000 after all the expenses. But now, I run at a loss due to the high cost of foodstuff, transportation and sundry expenses.”
However, a teacher, Grace Ugwu, advised families to avoid ostentatious living to overcome what she described as “these painful moments of life,” adding: “There are certain things one should not look at any longer if he/she hopes to continue to survive.
“If you have to trek to certain distances you were doing with a car before now, please do so. If you have to use the phone, use it reasonably well and don’t engage in idle talks on the phone to save money. Use text messages most of the time to communicate. Discard those things that you know consume resources around you and go for the number of children you can carter for.”
Many Nigerians are of the belief that ‘a lack of sincerity’ to get the country’s ‘moribund’ refineries working is responsible for the unending increase in petrol price.
Having spent billions of dollars over the past three decades on non-existent Turn Around Maintenance (TAM), and with the Federal Executive Council (FEC) approving another money ($1.5 billion) for the repairs of Port Harcourt refinery, the NLC deputy president is adamant that the problem with the sector is a governance problem.
“The government will tell you they are deregulating and they are still involved in fixing prices, the price should be controlled by market forces. The situation also tells you how warped and lopsided policy-making has become. “One would have thought that a serious ruling class would have solved the issue of refineries in Nigeria after the mass protest of 2012,” Jaye said.
Good news?
Meanwhile, FEC on Wednesday had approved the plan by the Ministry of Petroleum Resources to rehabilitate the Port Harcourt Refinery with $1.5 billion. The decision was taken at the weekly meeting of the council presided over by the President Muhammadu Buhari.
The Minister of State for Petroleum Resources, Timipre Sylva, disclosed this to State House correspondents at the end of the meeting at the Presidential Villa, Abuja.
The minister said, “The Ministry of Petroleum Resources presented a memo on the rehabilitation of Port Harcourt refinery for the sum of $1.5 billion, and that memo was $1.5 billion and it was approved by council today.
“So, we are happy to announce that the rehabilitation of the refinery will commence in three phases. The first phase is to be completed in 18 months, which will take the refinery to a production of 90 per cent of its nameplate capacity.
“The second phase is to be completed in 24 months and all the final stages will be completed in 44 months and consultations are approved. And I believe that this is good news for Nigeria.”
Going forward
“In the short-term, the government should not only cover the cost but should also create a buffer for the vagaries in the fuel price so that citizens don’t bear the burden.
“In the medium to long-term, you need to ensure there is domestic refining capacity in the country. If we have given 2023 as a framework, the government must ensure that those time frames must work and that they sanction people for their inefficiencies. The Nigerian government has been very lazy, they just believe in collecting rent,” Gaskia told Blueprint Weekend.
