THe proposal for a change in the price of fuel from N145 per litre to N165 per litre by oil marketers is a bad omen for the new year. Already, marketers in Kano State have increased the price of petrol from N145 to between N153 and N155 per litre. It is reminiscent of the increment in the price of fuel that saw Nigerians demonstrating in the streets in January 2012. Then, in what was described as “Occupy Nigeria”, the government had to contend with massive demonstrations that caused a reversal of the decision and negotiation of a moderate increase with labour leaders and civil society groups.
Another fuel price increase is not only going to deepen the hardship of ordinary Nigerians who are already living in a dire situation under the current economic recession, it is a sign that the government is not in charge of the petroleum industry. This is unfortunate given the president’s experience in the industry, his promise to overhaul the subsector, the removal of subsidies, and his promise to rid the petroleum industry of corruption.
In our previous editorials, we argued that Nigeria has to move away from importing refined fuel for local consumption. The illogicality involved in importing refined fuel is underscored by the scarcity of foreign exchange, which has largely accounted for the drastic fall in the value of the naira relative to the dollar. Indeed, the devaluation of the naira means that importation of any good for which there is a local substitute is an avoidably harmful action to the economy. Therefore, importing refined petroleum amounts to avoidably harming the economy. It involves getting dollars for the sale of crude oil and using the dollars to pay for refined fuel. The net gain in foreign exchange in such circumstances would be minimal. This is even the case because Nigeria’s exportation of crude oil outstrips its importation of refined fuel. If other imported materials are added to the importation of refined fuel, it becomes clear that Nigeria must stop importing refined fuel. It is indeed an embarrassment that a country that provided for local needs for refined fuel in the 70s and 80s has been unable to do so for over a decade now.
Given the removal of subsidies, it is expected that the price of fuel will respond to the price changes in the international market. In recent times, oil price has experienced some marginal increase. It is therefore not surprising that marketers are proposing a price hike. Indeed, there is no guarantee that they would leave it at the rate of N165 per litre. They are likely to return to demand a further increase in due course. Perhaps, they are already eyeing a price hike of N200 per litre. While we do not call for the return of the corrupt subsidy regime, we think that the government can be more proactive in creative ways to ensure price stability. We call on the government to promote and fast-track local refining of petrol.
The government must realise that poverty has increased dramatically with the ongoing recession. Unemployment has soared and the government’s cash transfer programme which is just a pilot scheme promises N5,000 per household to the poorest of the poor. At the current rate of N145 per litre, N5,000 can buy only a little more than 34 litres of fuel. Thus, an increase in fuel price translates into unaffordable hike in the cost of transport for ordinary folks. It translates into high cost of production for companies which rely on plants for energy. Many homes depend on electricity generators that use petrol for energy. Furthermore, the purchasing power of the average Nigerian has fallen drastically in line with the devaluation of the naira. Although the Minister of Labour has broached the idea of an upward review of the minimum wage, nothing has happened in that regard.
A price hike is bound to worsen the quality of life of Nigerians, which is already too poor for many. The abject poverty of many Nigerians brought about the cash transfer initiative in the first place. Even so, the programme targets only a paltry few of the very poor. This level of poverty does not suggest a price hike for fuel. The Petroleum Products Pricing Regulatory Agency (PPPRA) has assured the public that the existing price band of N135-N145 per litre is still sustainable and that there is no basis for increase in the pump price of fuel. The Nigerian National Petroleum Corporation (NNPC) has also assured that there is no immediate plan to increase the pump of price of petrol. We hope the situation will not deteriorate.