Mixed reactions, NLC protest hike in fuel price
It has been a long standing argument by critical assessors of the economy that deregulation remains the tonic to turn around the fortunes of the downstream sector of the oil and gas industry. Those who canvass this position argue that it will provide enduring solution to the recurring scarcity of petroleum products and halt the corruption in the subsidy regime, The Nation report.
The payment of subsidy has been digging a hole in Federal Government’s purse to the tune of about N1trillion annually. Apart from halting the payment, which not a few Nigerians describe as a scam, deregulation will also encourage investors to build refineries and sell products at market prices, boost investments and create jobs.
More importantly perhaps, those clamoring for deregulation say that it will end the paradox of a nation dependent on importation of petroleum products despite being world’s sixth largest oil producer.
However, the Federal Government’s announcement yesterday of an increase in the pump price of Premium Motor Spirit (PMS), otherwise called petrol to N145 per liter did not go down well with many.
Labour union leaders are literarily up in arms over the decision. Some of them, who spoke with The Nation, could barely hide their anger and frustration over what they termed as “wrong timing and ill-conceived” manner the Federal Government deregulated the sector.
The Director-General, Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA), Sir Emeka Okereke, said:“We have always said let subsidy go; deregulate so that market forces will determine the price of petroleum products and the dollar.” . He recalled that because of political exigency, the administration of former President Goodluck Jonathan failed to take the bull by the horns and deregulate the sector.
He said this was why the administration buckled under the pressure by labour unionists and civil society in 2012 when there was a nationwide protest against the removal of fuel subsidy.
“Subsidy doesn’t make economic sense anymore. It has become unsustainable. We will never come out of the woods as long as we continue to subsidize the price of petroleum products,” Okereke told The Nation.
The ECCIMA DG lamented that the new increase in fuel price of N140 per litre was ill-timed, considering the fact that the economy is in a recession. Describing the new price increase as “insensitivity”, he said it would further push the economy into recession and aggravate the sufferings of Nigerians whose purchasing power had ebbed in recent time.
Okereke said with the new fuel price, inflation rate would rise.
“It’s a worrisome development. Government should do a rethink. Let’s do it (deregulation) totally. Don’t rob Peter to pay Paul,” he said, pointing out, for instance, that the refineries ought to have come on stream before deregulation.
While noting that deregulation will open up the oil and gas industry for more players to come in, he said there is need to first stabilise the system, build capacity by encouraging local refining since over 60 per cent of Nigeria’s fuel needs are imported before full deregulation.
The Petroleum Products Pricing and Regulatory Agency (PPPRA), which statutorily moderates pricing for the industry said Nigerian National Petroleum Corporation (NNPC) Retail stations on the outskirts of major cities are advised to sell at price lower than N145/litre.
The agency explained that in performing its role enshrined in the PPPRA Act No 8, 2003, it commenced a petroleum products price modulation framework on the 1st of January, 2016, with the aim of ensuring a ‘fit-for-all’ approach that seeks to serve the interest of the Nigerian consumers, marketers and the economy.
The release signed by PPRA’s Acting Executive Secretary Mr. Sotonye E. Iyoyo said: “This review became imperative in the face of extreme difficulties faced by petroleum product importers in sourcing foreign exchange. To meet the consumption demand of the nation, importers will henceforth be permitted to source for their foreign exchange requirements from the secondary sources.”
Iyoyo added that PPPRA was conscious of the difficulties that Nigerians have been going through in the last few months and to ameliorate this situation, “we shall continue to modulate pricing in accordance with prevailing market dynamics thereby ensuring fair value to all citizens.”
But it is doubtful if Nigerians were swayed by the reasons advanced by Iyoyo for increasing fuel price to N145. Already, the new fuel price, couched in what PPRA called ‘price modulation’ has pushed Nigerians to the panic mode apparently because of its spill over effects.
For instance, the President, Nigerian Association of Energy Economists (NAEC), Prof. Wunmi Iledare, said with the increase, a shock in the economy is expected. Hear him: “Anytime there is hike in the price of fuel in the country, it affects the disposable income of workers,” he told The Nation.
Iledare said: “Without doubt, Nigeria cannot continue to sell fuel at N86.50 per litre, in view of the huge amount of money paid as subsidies. The way out of the fuel crisis is deregulation of the downstream sub-sector of the petroleum industry, which the Federal Government is trying to do.
He, however, said deregulation needs to be done in phases to lessen its impacts on the economy. He said government should have done the deregulation on a partial basis by creating what he described as a ‘double market’. The former President of International Association of Energy Economists (IAEE) said by so doing so, government would create a competitive environment for players in the industry.
Iledare explained the double market thus: “There is one market for the NNPC to sell fuel and another one for the private operators. Once this happens, competition would drive down the price of petroleum products. It is at this point that we can say that government has deregulated the downstream sector.”
The Secretary, Major Oil Marketers Association of Nigeria (MOMAN), Mr. Olufemi Olawore, also said the government has taken the right step by increasing the price of fuel to N145 per litre. “We have been clamoring for deregulation of the sector, and the government has taken a bold step to deregulate the sector in order to make it competitive,” he said.
The former Group Managing Director (GMD) of NNPC, Chief Chambers Oyibo, also said he believes in deregulation.
“We have talked about it for a long time, but Nigerians said they wanted subsidy. Smuggling and diversion of fuel is a result of subsidy.
“When we deregulate, somebody in Lagos does not necessarily have to pay the same price for a litre of petrol. Deregulation will make fuel available; we don’t have to pay the same rate across the country, but we will get fuel for use,” he said.
Oyibo however, said after deregulation, the Federal Government would need to ensure that marketers don’t gang up and increase prices. “So, the government would have to strengthen existing agencies to monitor this.
“Again, after deregulation, there will be an incentive for private investors to build refineries because in the past, licences were given for refineries but nobody built any. They did not because they did not want government to tell them how much to sell the finished product. They do not want to sell at a price that will not be profitable,” he said
The former NNPC GMD said with deregulation, prices will initially go up, but after that, the prices will come down like what happened in the telecoms industry. “Initially we were paying N30,000 or more for SIM cards, now they are begging you to take SIM cards because there is volume usage and the companies are making money; so they can invest money to expand the business”, he said.
Labour kick: Says increase is unacceptable
The Nigeria Labour Congress (NLC) President Ayuba Wabba said any increase in the pump price of petroleum products would impoverish Nigerians and distabilise the country.
“Any increase in the price of petroleum products is unacceptable to labour and we are going to fight it,” he threatened.
Wabba said considering the current economic challenges, which have reduced workers to beggars, this is not the right time to increase fuel price. “As we are talking now, only about 12 states have paid their workers, the remaining states owe. Where do we go from here?” he asked.
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