Petrol Pump Price Hike Amid Failing Economy: An Ill-Timed Policy
Written by Lucas Nwachukwu
On Wednesday, July 1, 2020, the Federal Government of Nigeria announced the sudden increase in the pump price of petrol by over ₦20. A litre of fuel will now sell between ₦140.8 and ₦143.8 at retail stations across the country, up from the previous ₦121.50 and ₦123.50 band. The increase was sequel to the recommendations given to the Federal Government by the Petroleum Product Pricing Regulatory Agency (PPPRA) which is responsible for fixing the price of petroleum products in the country. According to the PPPRA Executive Secretary, Abdulkadir Saidu, “After a review of the prevailing market fundamentals in the month of June and considering marketers’ realistic operating costs, as much as practicable, we wish to advise a new PMS pump price band of ₦140.80 – ₦143.80 per litre, for the month of July 2020.” It could be recalled that the PPPRA had on May 31, 2020, announced a new pump price band that would be ₦121.50 to ₦123.50 per litre, a decision which was informed by the crash in the price of crude oil at the global market due to the ravaging impact of the COVID-19 pandemic. It is therefore ill-timed and preposterous, the recent increase to ₦140.80 – ₦143.80 of the pump price of petrol, at a time when oil prices are making a remarkable comeback after falling to a record low in April, as a barrel of crude oil now sells for between $39.81 and $42.27 at the international market.
As Nigeria continues to deal with the economic implication of the COVID-19 pandemic, the hike in the pump price of petrol will no doubt shoot up the inflation figure, which already stands at a disturbing 12.40 percent. According to the Nigeria Bureau of Statistics (NBS), inflation rate rose to 12.40 percent (year-on-year) in May 2020, and this represents 0.06% points higher than 12.34% recorded in April 2020. Typically, when fuel price increases, so does inflation, which not only makes goods and services expensive but also stifles economic growth. The Federal Government must consider these implications and the burden it brings on the citizens and reverse the increase.
The NBS in 2019, published a report which showed that 82.9 million Nigerians are living in poverty. This suggests that almost 50% of Nigerians live below the poverty line. The staggering number of poor people is estimated to triple as livelihoods across almost all economic sectors have been adversely affected by the COVID-19 pandemic. The sudden increase in petrol pump price radically negates the statement credited to President Muhammadu Buhari on the purpose of the recently-developed Economic Sustainability Plan which he said was aimed at stimulating the economy amid the pandemic, through pro-poor policies. the increase is unnecessary, ill-timed and would overburden the citizens.
Refining crude oil locally, as opposed to an importation of already-refined products, remains the solution to the challenges associated with fuel scarcity, fuel subsidy and continuous hike in pump price. Nigeria has four refineries, of which two are located in Port Harcourt, and one each in Warri and Kaduna. These refineries have the capacity of refining around 445,000 barrels per day, which should be able to meet the country’s domestic consumption requirements. Hence, there is a need for a renewed drive to build new refineries and rehabilitate Nigeria’s ailing and under-performing refineries in order to bring to an end, the dependence on oil subsidy and wastage of resources which has spanned over a decade and a half.
Furthermore, the Petroleum Industry Bill should be speedily and fully passed into law to introduce better governance in the sector. The bill which is designed to establish a framework for the creation of commercially-oriented and profit-driven petroleum entities, in order to ensure value addition and internationalisation of the petroleum industry, remains the answer to the challenges the country is experiencing in that sector, if fully enacted as a law and duly implemented to the letter. The low performance of the refineries is a fall-out of the issue of poor administration and management of the refineries which has been a nagging challenge in the sector. These refineries are owned by the Government and this means that activities involving funding and management, are subject to tedious bureaucratic processes. These processes are time-consuming and are not often carried out in a reliably manner. If this and other challenges afore stated, remain the prevailing factors, then there will not be a solution in sight to this malaise and Nigerians may continue to bear the brunt through the payment of exorbitant charges and increment of levies.