Rising fuel price, a self-inflicted problem

FOR the underclass and remnants of the fast-disappearing middle class, 2022 may be just another new year and not a happy new year unless there is a rethink of the plan to raise the price of petrol to N340.00 per litre in Nigeria’s road-driven economy.  For more than forty years, fuel price hikes have been sources of financial anguish for the vast majority of Nigerian citizens.  The increase proposed to come into effect in 2022 will make the pump price of petrol more than 100 per cent higher than the present N162.50.  Frequent increases in the prices of petroleum products have contributed in no small measure to the rapid decline in Nigeria’s economic fortune and largely explain why Nigeria is today eminently placed in the comity of poverty-stricken nations.  As usual, the planned petrol price hike will bring about a corresponding increase in the cost of transportation and the consequence will be an across-the-board inflation.

In the last five years, the prices of food items and other basic necessities have gone up at least threefold and the ruinous effects are palpable in every facet of life.  When a litre of petrol begins to sell for N340.00, it will not require the services of a soothsayer to know that life, except for the affluent, will hover between difficult and miserable.   The national currency that is already badly battered will further lose value and the poor will sink into aggravated poverty.  The labour movement has spoken against what has been widely perceived as an impending hell on earth.  The National Association of Nigerian students, that has been passive for decades on critical national issues, has also raised its voice against it.  Nigerians are waiting to see whether the government will hearken to the voice of the people or obediently comply with the dictates of the overbearing headmaster – the Breton Woods institutions – with which the state governors are fully in alignment.

It is worrisome is that successive administrations seem to be oblivious of the sources of the problem.  Apart from the trite and sterile arguments advanced for decades to explain away fuel price hikes, the attention of the public is now being diverted to a so-called palliative that apparently stands logic on its head.  The government wants Nigerians to see the proposed payment of N5,000 to forty million so-called poorest of the poor – in a country in which more than a hundred million live in abject poverty – as justification for the ill-thought-out petrol price increase.  The Nigerian National Petroleum Corporation recently stated that N1.16 trillion was spent on petrol subsidy in eleven months of 2021.  This will give us a monthly average of N105 billion and a total of N1.26 trillion in twelve months.  The proposed palliative will amount to N2.4 trillion also in one year. The patent absurdity lies in the fact that the savings to be made from the subsidy removal will be slightly above half of the amount to be paid to the poorest of the poor.   Will a government that perpetually borrows to balance its annual budget send another loan request to the National Assembly because it is implementing a programme that cannot bring about any noticeable improvement in the life of the beneficiaries?

It is not a pleasant surprise that successive administrations have not seen it as an urgent national requirement for Nigeria to embark on steps that will put an end to fuel importation.  It should be an embarrassment to the people who have been privileged to manage Nigeria’s affairs that a major oil producing country has, for decades, relied on importation to meet its domestic needs in refined petroleum products.  Fuel subsidy will remain a major source of economic crisis while the prices of petroleum products will continue to rise in geometrical progression for as long as Nigeria is unable to add value to its crude oil for its own use.  Another major source of the subsidy crisis Nigeria has been grappling with is the insistence on uniform prices for petroleum products in every nook and cranny of the country.  One of the time-worn excuses, being constantly deployed by the managers of the country’s affairs to justify fuel price hikes, is that the pricing of the products should be determined by market forces.  How compatible is the principle of market forces with the existence of a Petroleum Equalisation Fund which has the mandate of ensuring that these products sell for the same price across the length and breadth of the country?  The continued existence of the fund calls into question the government’s sincerity.

Transportation is an integral part of the production process and the cost is appropriately factored into the market price of any product.  For political considerations and without regard for economic rationality, the fund was created to reimburse petroleum marketing companies for losses incurred for selling fuel at the same price countrywide.  The combination of this knee-jerk policy and lack of refining capacity is what has brought Nigeria to this sorry pass in which the crude oil has been more of a curse than a blessing. If the fund was created at a time Nigeria’s problem was not money but how to spend it, what is the rationale behind its continued existence at a time the country is neck deep in debt?    The subsidy problem is self-inflicted.

• Olatoye, a veteran journalist, lives in Ibadan