Unsustainable petrol price?

IN  its early days in power, the Muhammadu Buhari administration effected a painful increase in the pump price of fuel from N86.50k to N145 per litre. This naturally caused Nigerians anguish, but the administration called for understanding, saying the removal of subsidy on PMS was in the best interest of the country. However, it would certainly take more than wishful thinking for any government that has lost the supply side of the market to the vagaries of the international market to make such a definitive assertion on a product whose supply side had long been wrested from its control. So, recently when the price of crude oil rose in the global market, the claims of subsidy removal suddenly turned stale when the landing cost of the refined product  shot up by about 40 per cent.

With the landing cost of fuel estimated at over N200 per litre, the current pump price of N145 per litre is now without doubt obsolete and will sooner than later have to be reviewed, unless the government intends to reverse its policy of removal of subsidy on PMS. In the face of the current economic hardships occasioned by recession, that is a bitter pill to swallow. The price of Brent crude oil was averagely at $45 per barrel when partial deregulation was announced last year. But before the year ran out, the price had jumped to $56 per barrel, which pushed the price of the metric tonne of PMS from $400 to $560. Hence, it would literally be impossible to expect the price of fuel to remain at N145 even if the government has chosen to remain reticent about the issue.

The truth, however, is that the local consumption of PMS would not have been affected by the vagaries of the global market if domestic capacity had not been compromised by corruption. Things did not have to deteriorate to the point that local consumption would not be met by local production capacity. If the domestic consumption could be met with the capacity of the local refineries, the impending crisis that would be triggered by the slightest increase in the pump price of PMS would be averted. The present administration  may not be blamed for the state of the country’s refineries, but its slow approach to the issue is certainly not helpful, neither is its studied silence and pretence about the implications of the imminent crisis. Since it came to power in 2015, it has not been able to intervene meaningfully in improving the local production capacity of the refineries. Does the government want to address the situation in any particular way or does it want to just allow market forces to hold sway?

Since many of the marketers rely on the Nigerian National Petroleum Corporation (NNPC) for their supply, it is certainly clear that it could not have been in the dark since the price of crude oil shot up at the global market a while ago. So, who has been responsible for picking the bill for the increase in landing cost? And for how long can this transaction continue before the bubble bursts? When the bubble bursts, can the government contain the backlash of the social crisis that will be consequently precipitated?

Already, the prices of other products that have been completely deregulated, like diesel and kerosene, have shot through the roof and the deleterious effects are being felt in the under-performing economy. The only reason that the case of PMS has not blown into full-scale crisis is that, somehow, the NNPC has been picking up the bill for the difference in the increased landing cost, coupled with the fact that the impoverished consumers have been forced to curtail their consumption significantly. The implication of the NNPC picking up the bill is that the entire federation is now subsidising fuel consumption, which is one of the reasons why the funds accruing to the states from the Federation Account has reduced significantly. But then, for how long will the deception and reticence on the part of the government continue?

A lasting solution to the problem of supply for local consumption of petroleum products is, for us, the real deal. This is why we are surprised that little or no commitment has  been made in that direction by the government. It is high time the Federal Government and the states engaged this critical issue and fashioned out a solution.