• Why petrol price won’t drop now’
Center for the Promotion of Private Enterprise (CPPE) Chief Executive Officer Dr. Muda Yusuf, Lagos Chamber of Commerce & Industry, (LCCI) Director General Chinyere Almona and Senator Shehu Sani have urged the Federal Government to consider the social, economic and political impact of the new petrol price on the citizenry and the manufacturing sector.
They stressed that social, economic and political factors matter in policy formulation.
They warned that commercial considerations should not completely override the factors because there is always a place for political economy in the interest of the vulnerable segments of society.
Almona and Muda also said those who believe that the commencement of the crude sale to domestic refineries on October 1 would immediately result in low petrol prices were mistaken.
Muda also argued that the government needed to understand that the “Nigerian economy is not ripe for full-blown deregulation and market principles on all fronts.’’
His words: “The Nigerian economy is not ripe for full-blown deregulation and market principles on all fronts. The social cost of such policy choices is typically very high.
“This is an economy with very weak social safety nets. Over 100 million people are wallowing in various variants of poverty.
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“The latest increase in PMS price is regrettably ill-timed and does not reckon with the prevailing difficult economic conditions. It is important to stress that Social, economic and political considerations matter in policy choices.
“Commercial considerations should not completely override these considerations. There is always a place for political economy in the interest of the vulnerable segments of society.
“There is also an issue of policy sequencing. The present administration has presented an Economic Stabilisation Bill to the national assembly. The Bill is expected to bring some relief to the citizens and businesses.
“It would have been better to allow the proposed mitigating measures to be activated and gain traction before coming up with the petrol price hike.
“What the economy needs at this time are measures to ease the current economic and social challenges; not policies that would aggravate them.
“It is desirable at this time to urgently cut import duties and taxes by a minimum of 25 per cent on all industrial raw materials, passenger buses of 18 seater and above and cars of 2000cc engine capacity and below.
“The customs duty exchange rate should be fixed at a maximum of N1000/dollar to reduce the current prohibitive cost of imports. Relevant legislation should be amended to that effect. This is without prejudice to the fiscal policy measures contained in the Economic Stabilisation Plan.
“The government must be ready to trade off some revenue in the current situation. There is a need to seek to achieve the maximisation of the welfare function for citizens and the productivity function for businesses. The government should not be too fixated on revenue maximisation.
“The effect of the sale of crude in naira to Dangote Refinery may take a while for it to be operationalised or have an impact. I think there’s a need to still give it time. The products sold now are purchased in dollars. It is ideal to give one month’s grace for this crude oil sale in naira policy to kick in.
“I am not sure that NNPCL will be able to provide all the crude oil needed by Dangote Refinery. Yes, there is an agreement to sell in naira but how much of the demand will NNPCL be able to meet?
“If NNPCL is only able to provide 50 per cent of crude oil required by Dangote Refinery, then it means they have to source the remaining balance from other countries through importation. That is what is happening.
“Now, we are talking of a complete deregulation of petrol price; this is a factor because before now, NNPCL had been giving some partial subsidy and that was why it was the sole off-taker of Dangote Refinery initially and selling to marketers at a price lower than market price.
“But now that NNPCL has pulled out of this arrangement, obviously the prices will have to go up because the subsidy factor has been removed. These are factors that have contributed to the high price of petrol.’’
Almona also said: “Most Nigerians had expected that with the planned take-off of Naira crude sale to Dangote Petroleum Refinery, that prices will naturally crash, adding that she was not aware that NNPCL had started selling crude in naira to Dangote Refinery.
‘’The crude Dangote Refinery is using currently was bought at an international rate outside the confines of Nigeria and what we are witnessing today is market forces at play.’’
According to her, the increase in the price of petroleum products is made worse by the government stopping the payment of subsidy.
Almona added that since the current product used by Dangote Refinery was bought in foreign currency, “it cannot be sold lower than how much it was bought.’’
Senator Sani, who represented Kaduna Central in the 8th National Assembly and the President of the Nigerian Baptist Conference, Rev. Israel Akanji, called on President Bola Ahmed Tinubu to intervene because the new pump price of petrol would add to the difficulties that Nigerians are facing.
They spoke with reporters at the 64th Baptist Ministers Conference, 2024 in Kaduna.
Sani said: “All nations that are going through the transformation process, must undergo a period of pain and sacrifices, but sacrifices must not be from the poor people; people in positions of power must be seen to be making sacrifices.
“We are a nation of 224 million people, the biggest black nation in the whole world, and in reality, we cannot shy away from the serious economic challenges that the masses are facing.
“The President, the governors, Senators, and people within the position of authority and power must make sacrifices, that’s how we can make this nation move forward.”
Rev. Akanji said: “The government must work on in the area of transportation, and this is because petrol is too expensive. Something has to be done.
“If petrol can come down a little, then farm produce will be lower, house rent will be reduced, and the issue of school fees will also go down.
“I am a proprietor of a university. The university can hardly function in this situation. Things are too expensive, and we need Government intervention.”
Professorial Chair, Oil and Gas Economics and Management at the Institute of Oil and Gas Studies, University of Cape Coast, Prof Wumi Iledare, said until Dangote Refinery operates at 90 to 95 per cent capacity rate, its normal profit price cannot be below N1, 000.
Iledare, who is also the Ghana National Petroleum Corporation (GNPC), however, pointed out that with time and proper market supervision as prescribed in the Petroleum Industry Act (PIA), petrol prices would adjust accordingly.
He said: “I have personally advocated equal access of all wholesale marketers to the Dangote Refinery.
“The wholesale downstream market structure in Nigeria for petrol is purely anti-competitive. The role of the petroleum authority is paramount to ascertain what can be described as fair return pricing modulation in the meantime.
“This is not necessarily synonymous to soliciting for a price control instrument.’’