Nigeria: Do We Need a Fuel Price Hike?
We are back to that season when the federal government grapples with fuel price increase. This often happens when the price of crude oil, increases internationally.
While other oil producing countries celebrate when the price of crude oil increases internationally, in Nigeria that is exactly when the leaders of the country mull the idea of increasing fuel price.
In the rulebook used by successive governments, the first move is for government to pretend helplessness in the effort to supply enough fuel for Nigerians to carry out their economic activities. That is exactly what the group managing director (GMD) Nigerian National Petroleum Corporation (NNPC) Mele Kyari did recently.
The GMD literarily threw his hands up in surrender declaring ‘We can’t continue subsidy’ and adding that petrol may sell for N234 per litre. He asserted that the company cannot continue to bear the subsidy burden. The Petroleum Products Pricing
Regulatory Agency (PPPRA) had released a template increasing petrol price to N212 per litre — but the template was deleted in the face of public displeasure.
Speaking during a ministerial briefing at the Presidential Villa,
Abuja, Kyari said NNPC can no longer bear the burden of underpriced sales of premium motor spirit (PMS), better known as petrol, adding that a price based on international factors need to be implemented. He added that NNPC pays between N100-120 billion a month to keep the pump price at the current levels.
“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 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.”
The ministerial briefing raised a lot of questions and created
ambiguities. In one breath the GMD said the NNPC pays between N100-N120billion a month to keep the pump price at the current levels, while in another breath he prevaricates on whether NNPC pays subsidy when he said, “As we speak today, I will not say we are in a subsidy regime but we are in a situation where we are trying to exit this subsidy or underpriced sale of PMS until we get in terms with the full value of the product in the market.
“Today, PMS sells across our borders anywhere above N300 at any of our neighbours. And in some places, it is up to N500 and N550 to the litre.
“In some countries, the Nigerian fuel is their primary fuel. We are supplying almost everybody in the West African region, so it is very difficult to continue this because we have our own issues and that is why the eventual exit from this is completely inevitable.”
Recall that last year, the NNPC announced that there would be no more payment of oil subsidy going forward. At the time the group managing director of the Nigerian National Petroleum Corporation (NNPC), Malam Mele Kyari, said Nigeria would no longer pay subsidy on petrol with the ongoing global oil price decline. Kyari disclosed this in a statement signed by NNPC spokesman, Dr Kennie Obateru.
In another morning television programme, the NNPC boss said: “There is no subsidy and it is zero forever, going forward there will be no resort to either subsidy or under-recovery of any nature.
“NNPC will play in the marketplace, it will just be another marketer in the space. But we will be there for the country to sustain the security of supply at market price,” he said.
Notwithstanding the true position of things on payment of subsidy or otherwise, the truth of the matter is that any fuel price increase at this time will not only hurt the ordinary Nigerians, it could cripple the nations already lame economy. A huge chunk of Nigeria’s economy is run on fuel and diesel guzzling powering generators. A huge swath of Nigeria’s service providers are small scale operators who run petrol dependent micro-economy. They are the operators in the informal sector, namely barbers, tailors, hairdressers, carpenters, small scale manufacturers, traders, market men and women among others.
Given the current state of the country’s economy we should not be discussing fuel price increase. We cannot be increasing the price of fuel in a situation where we are simultaneously the world headquarters of unemployment, headquarters of extreme poverty, and the world capital for out of school children!
We have recently been declared the nation with the highest unemployment rate on earth. Bloomberg Business on Saturday, March 27, 2021 reported that Nigeria is to emerge as the nation with the highest unemployment rate on earth, with 33% of all citizens suffering unemployment. This is not a country where the leaders should be contemplating increase of price of fuel which would obviously exacerbate the rate of unemployment in the country.
In the ministerial press briefing where the GMD of NNPC was wooing Nigerians to support the increase in the price of fuel, which could come into effect after negotiation with the Nigeria Labour Congress (NLC), the NNPC boss hinted that they are already reaching out to labour on a price that would be acceptable to Nigerian workers.
Can Nigerians trust NLC to represent their interest in a clime where labour leaders have perfected the act of negotiating for their personal interest above workers interest? The answer is still hanging in the air.
The advice to this government is, do not increase the price of fuel.
If you do, the economy will spin out of control with attendant social and political consequences. Already, the hiccup in diesel price has had a huge impetus on prices of goods and services. Cement has gone up, steel rods prices have increased, staples have had price increases all because diesel has jumped from N215 per liter in early March to N255 as I write.
The urban inflation rate increased by 17.03 percent (year-on-year) in January 2021 from 16.33 percent recorded in December 2020, while the rural inflation rate increased by 15.92 percent in January 2021 from 15.20 percent in December 2020. These are figures from federal government agency, National Bureau of Statistics (NBS).
These figures and others from NBS should be enough to convince the government that any increase in fuel price would make things worse for Nigeria and its citizens. The only people that will not be adversely affected by a fuel price increase ate those who are in high government offices, they are the very ones that enjoy fuel paid for by government.