The Nation Newspaper

Tag: price

  • Petrol price reduction

    Perhaps, the reduction in the price of petrol from N97 per litre to N87 is the first time in recent memory the selling price of that commodity would come down in this country. All we have been treated to in the last several years have been constant increases in the name of fuel subsidy removal that pay scant regard to the wellbeing of our toiling people.

    So when the Minister of Petroleum Resources, Diezani Alison-Madueke announced government’s reduction of the selling price of petrol penultimate Sunday, it must have struck as a sharp departure from the norm. And reactions to it are bound to follow this mood.

    The measure which was dictated by the falling price of fuel in the international oil market has expectedly attracted reactions from segments of the Nigeria population. The Nigerian Labour Congress (NLC) commended the price slash but insisted that it is not deep enough. For drivers and commuters across the country, the reduction would make life a little better for them. There are also those who think the reduction is a design by the PDP government to catch votes in the coming elections.

    For the opposition APC, the reduction by just 10.3 per cent is a “mere tokenism” at a time the price of crude oil has crashed by about 60 per cent in the international oil market. It said the selling price should not be more than N70 and that at N87 the government was forcing Nigerians to subsidize the massive corruption in the oil sector.

    All these views have their merits and therefore cannot be dismissed with a wave of the hand. Not when it is recalled that since the decline in the price of oil commenced some months back, there have been calls on the government to slash the selling price of petrol in keeping with trends outside our shores. These calls were further reinforced by the fact that all along, the government had hinged fuel price increase on the high cost of the commodity in the international market. It was the same logic that was the raison d’être for previous increases in the price of petroleum products in the name of fuel subsidy removal.

    Moreover, the fear of further increase or removal of fuel subsidy as it is generally called was still palpable some months back such that the government had to come public denying such a  move.

    If by any circumstance, there is a sharp fall in the price of that commodity, it is only rational that it should be followed by a corresponding reduction in its domestic price.

    The government did not help matters when it appeared to have shut its eyes to reactions to the development by other oil producing countries. This is especially so when other African countries as Zambia and Tanzania had slashed the price of petrol to 23 and 16 per cent respectively. If the contention is that the reduction did no go that far as it only represented 10.3 per cent of the current price that point cannot be wished away. More so when weighed against the background of the raging poverty in the country and the huge corruption that pervades all spheres of the national economy.

    The scandalous corruption in the oil sector denoted by the exposed scandal in fuel subsidy payments is the more reason why the ordinary people should be made to take full advantage of any decline in the international price of crude oil.

    We are all witnesses to revelations sometime ago of how unscrupulous marketers ripped the nation dry by receiving payments for fuel not supplied. Much of the companies and individuals that were involved in that scam have their cases before the courts even as the wheel of justice is grinding very slowly.

    It is therefore not out of place to demand that the full benefits of the slide in oil price should be availed our toiling people who have over the years, borne the brunt of the misrule of various governments.

    It is not a matter that has to do with one government. It has little to do with who is in power now or the efforts to effect regime change through the current electioneering campaigns. This point has to be made and most unambiguously too otherwise we mix issues and get no where with them.

    Nigerians need the full benefits of the oil price slash. That could be the little token they get from the oil gift which nature bountifully placed at their backyard. That could form part of their share of the national cake.

    Besides, a further reduction in the domestic price of petrol will impact positively in the prices of goods and services that are largely patronized by the poor. It will not only force down the price of transportation but that of goods and services largely patronized by the poor.

    Being a populist policy, it is not surprising why it has been dubbed a vote catching strategy. But it is immaterial whatever capital the government of the day may wish to make out of the measure. Even if the target is to lure the larger public to the side of the government given the coming elections, what is important is that ordinary people will still be better with the reduction. That is a better way to look at the matter. We should align with those who want a further reduction rather than dissipate energy on whatever benefits the government may get from it.

    Even then, the rational for the reduction is hinged on events in the international oil market and this should be clear to everybody. It has not even gone that deep to correspond with the fall in oil price in the international market. So the issue of scoring political points through the reduction should be out of it. It is an economic decision that is universal to oil producing countries. If the current regime gains any political edge from it, so be it. Such should neither detract from the current reality in the oil market nor blur our understanding of the dynamics of international oil pricing.

    It is hoped that it is not being suggested that measures that will improve the lives of our people should be denied them just because someone somewhere may take political advantage of them. That will amount to carrying such matters too far.

    Beyond these, the slide in oil price should prick our collective consciences on the misuse of the revenue that has overtime accrued to the nation from that commodity. It should send the message very clearly that there is time for every thing. It is possible that we will someday find to our dismay that a golden opportunity to lift our country from the shackles of poverty and underdevelopment has been frittered away. We may soon discover that a golden opportunity to elevate our country in the development matrix has been lost.

    These are the foreboding issues that have been elevated to the fore by the sliding price of oil. In the ongoing electioneering campaigns, politicians have made issues out of the need to diversify the nation’s economic base. This is nothing new. It is only hoped it is not another vote catching gimmick that will give way to sectional and primordial considerations as a guide to economic decisions as soon as the elections are over.

  • Fuel price cut

    •When will kerosene and diesel prices too come down to reflect the new reality?

    Nothing better illustrates the profound disconnect between citizens and the Jonathan administration than the brouhaha over the margin of reduction in the pump price of petrol in the aftermath of the global slump in oil prices. After weeks of strident calls for price reduction, Minister of Petroleum, Diezani Alison-Madueke, would finally announce a N10 cut from N97 to N87 on a litre of petrol on January 18.

    A day after, the Petroleum Products Pricing Regulatory Agency, PPPRA’s executive secretary, Farouk Ahmed, would give a breakdown of how the new price was arrived at. He gave the landing cost of petrol as at the close of business on Friday, January 16 as N74.35 per litre. With the approved distribution margin unchanged at N15.49 per litre, he gave the new market price as N89.84 per litre, leaving N2.84 per litre as subsidy on the new pump price.

    If we expected the petroleum minister and the petroleum price regulator, PPPRA to touch on the pump prices of domestic kerosene and industrial fuel – diesel, nothing of the sort came forth. Indeed, neither the minister nor the PPPRA boss said anything about kerosene price which, like petrol, is supposed to be regulated at N50 per litre but actually sells for anything between N120 to N150 in the open market. As for diesel, mostly used by manufacturers and businesses to power their operations, although its price is officially deregulated, in reality, the price is dictated, not so much by any market fundamentals, but by a powerful cartel that willy-nilly has the end-users at their mercy.

    The big question here is why the Federal Government would accept the basis for the discount on petrol price on one hand, while denying the same basis for kerosene and diesel on the other? The answer is to be found in the grotesque, laisez faire environment of fuel pricing which the Federal Government has promoted and sustained over the years, all in the name of deregulation. Of course, in removing N10 off the price of petrol – being extremely price-sensitive – the Federal Government merely moved, albeit wisely, to take the winds off potential agitations in the wake of the unceasing demands for price cuts.

    Is the measly N10 discount the best the Federal Government can offer? First, we know that crude oil prices have tumbled by more than 60 percent over the last six months. The other known fact is that the Central Bank of Nigeria (CBN) has devalued the naira by some 20 percent in the last few weeks. Whereas the former would ordinarily have translated to lower landing costs, the latter would more than guarantee that products cost would never come down! Here, it seems so easy to appreciate the bind that the Federal Government has thrown the country in the event of its failure to terminate the current regime of fuel importation.

    We must say that we consider the argument by labour and some notable trade associations in favour of a return to the old price of N65 per litre persuasive. An offer of a paltry 10 percent discount only on petrol price is at best tokenistic. How about the Federal Government seeking to make a fetish of the PPPRA template also feigning ignorance of its make-up? That, to be sure, must be galling.

    Of course we know what the template, directly linked to the current wholesale reliance on fuel imports, contains. Apart from the Cost and Freight (C&F) values which are subject to foreign exchange fluctuations, the other elements have the trappings of the rentier economy which the downstream sector is fabulously known for. Domestic sufficiency in products refining, aside insulating the economy from the vagaries of currency movements, would appear the best strategy to sound the death knell of that rentier segment. That route, unfortunately, is what the Federal Government seems least prepared to take at this time, or ever.

  • Fed Govt slashes petrol price to N87 per litre

    Fed Govt slashes petrol price to N87 per litre

    The Federal Government last night slashed the pump price of Petroleum Motor Spirit (PMS) to N87.00 per litre.

    The new price regime, which took off from midnight, slices off N10 on every litre —an action that was immediately described as “too little” and “most likely political”.

    Minister of Petroleum Resources Mrs Diezani Alison-Madueke last night directed the Petroleum Products Pricing Regulatory Agency (PPPRA) to immediately effect the change at the pumps.

    She said: “As you may be aware there has been a lot of volatility in price of petroleum product particularly crude oil over the last few months , invariably this has meant that the price of the product in Nigeria has also been greatly impacted.”

    “It is as a result of this under the approval and directive of Mr. President and in line with Section 6 Clause 1 of the Petroleum Act, that it is my responsibility as the Minister of Petroleum to announce that there will be a reduction in the pump price of petroleum (primium motor spirit) by N10, therefore the reduction will be from N97 per liter to N87 per liter effective as of mid-night Sunday the 18th of January 2015.”

    “In line with this I have directed the Petroleum Product Pricing Regulatory Agency and the Directorate of Petroleum Resources to ensure there is strict adherence to this new pricing regime as soon as it takes effect from midnight Sunday 18th of January 2015.”

    “I do hope the entire country will benefit immensely from this reduction in the pump price of petroleum.” she added

    On why the government has to wait till this time, she said: “We think it is actually time to reduce the price. We have been watching very carefully for the last two weeks to ensure that the volatility did not destabilise this particular reduction in price and we think it is safe to implement it at this time.”

    Last week, All Progressives Congress (APC) Presidential candidate Gen.  Muhammadu Buhari urged the government to implement immediate price reduction on fuel products to reflect the downscaling in global oil prices.

    In a statement, the APC Presidential Campaign Council asked the government to “stop stealing from Nigerians and allow them enjoy the relief that has come to consumers of petroleum products globally”.

    The APC candidate said then, “The price of diesel which has been deregulated since 2009 still sells at the pump price of N150 and N170 per litre, the same pump price when the international benchmark per barrel of crude was over $100. Now that the international benchmark has dropped to $47.5 (USD) per barrel as at Monday, we ask: where is the deregulation and the relief which it ought to bring to local consumers of diesel?

    “For the Nigerian consumers, unfortunately the collapse of crude oil price since October 2014 has not translated into any change in diesel, kerosene and PMS prices across the country.

    “We challenge the federal government to reconcile the information on the website of the Petroleum Products Pricing and Regulatory Agency, indicating the maximum open market price of diesel per litre in December 2014 as being at N111.6 and the fact that the price has come down to less than $50 (USD) as at Monday.

    “We want to posit that that the maximum indicative benchmark open consumers of diesel should pay is at a margin below N100 per litre. Therefore, Nigerians are being short-changed by about N50 to N70 on every litre of diesel sold by government.”

    The Trade Union Congress (TUC) on January 5 asked the government  to take advantage of the falling oil prices to reduce retail prices of petroleum products.

  • Goldman, SocGen cut oil price outlook

    Oil dropped to the lowest level in more than 5 1/2 years after Goldman Sachs Group Inc. and Societe Generale SA reduced their price forecasts.

    West Texas Intermediate decreased 4.7 percent to $46.07 a barrel, and Brent 5.3 percent to $47.43. Crude has to “stay lower for longer” if investment in shale is to be curtailed to re-balance the global market, according to Goldman analysts. Societe Generale said falling prices may force the shutdown of expensive crude operations in Canada and the U.S.

    “In a violent move like this it’s impossible to pick the magic number that’s the bottom,” Katherine Spector, a commodities strategist at CIBC World Markets Inc. in New York, said by phone. “I’m not going to pick a bottom. Prices will have to go to a level that inflicts maximum pain before the bottom is found.”

    Oil slumped almost 50 percent last year, the most since the 2008 financial crisis, amid a supply glut estimated by Qatar at 2 million barrels a day. The Organization of Petroleum Exporting Countries is battling a U.S. shale boom by resisting production cuts, signaling it’s prepared to let prices fall to a level that slows American output that’s surged to the highest level in more than three decades.

    A worker waits to connect a drill bit in the Permian basin outside of Midland, Texas.

    WTI for February delivery declined $2.29 to $46.07 a barrel on the New York Mercantile Exchange. It was the lowest settlement since April 20, 2009. Total volume was 34 percent above the 100-day average.

    Brent for February settlement dropped $2.68 to end the session at $47.43 a barrel on the London-based ICE Futures Europe exchange. It’s the lowest close since March 16, 2009. Volume for all futures traded was 57 percent higher than the 100-day average.

    “It’s hard to see what will end the move lower given how bearish sentiment is,” Michael Wittner, head of oil research at Societe Generale in New York, said by phone. “The very weak fundamentals are still being priced in.”

    WTI will trade at $41 a barrel and Brent at $42 in three months, Goldman said in a report distributed today, citing excess U.S. storage capacity and predicting inventories will increase over the first half of this year. It also cut its price estimates for six and 12 months.

    “To keep all capital sidelined and curtail investment in shale until the market has re-balanced, we believe prices need to stay lower for longer,” said Goldman analysts including Jeffrey Currie in New York. “The search for a new equilibrium in oil markets continues.”

    Societe Generale reduced its average WTI price for this year to $51 a barrel from $65, Wittner wrote in a Jan. 9 report. Brent will average $55 a barrel in 2015, down from a previous estimate of $70.

    “The price forecast cuts by both Goldman and Societe Generale reinforce the fears that have driven us down to these levels,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said by phone. “We’re hunting for a bottom, but it’s anyone’s guess where that will be.”

    The Brent-WTI spread closed at $1.36, the least since July 2013 as the demand outlook for U.S. crude surpassed that for barrels elsewhere. U.S. refineries have operated at over 90 percent of capacity for the last two months, according to the Energy Information Administration.

    “The strongest pocket of demand is here, with refineries operating at near 94 percent of capacity,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The Mexican request for U.S. exports is also reducing the spread. This is a signal that more light, sweet barrels should be going that way.”

    The 40-year-old ban on most U.S. crude exports is set to be loosened after Mexico’s state-owned oil company asked for an exception. Petroleos Mexicanos said last week that it’s in talks with the U.S. Commerce Department to import 100,000 barrels a day of light crude to increase Mexico’s gasoline production and improve refining.

    Rigs seeking oil in the U.S. fell by 61 to 1,421, Baker Hughes Inc. said Jan. 9, extending the five-week decline to 154. It was the largest drop since February 1991, which also followed a slide in prices before the start of the Persian Gulf War.

    “This is a major change but we probably won’t see lower output this year,” Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said by phone. “We won’t see the ramifications of this and the lessening of the glut until 2016.”

    OPEC decided to maintain its collective output target at 30 million barrels a day at a meeting on Nov. 27. It’s competing for market share amid surging output in the U.S., where production expanded to 9.14 million a day through Dec. 12, Energy Information Administration data show. That was the most in weekly records that started in January 1983.

    Oil won’t return to $100 a barrel again, Saudi billionaire businessman Prince Alwaleed bin Talal said, according to USA Today.

  • The fuel price slash debate

    The fuel price slash debate

    •This is unnecessary; FG should get more refineries on board

    In the heat of the clamour by a broad section of Nigerians for the reduction of fuel prices last December, finance minister, Ngozi Okonjo-Iweala, had reportedly told those behind the agitation to wait until oil prices plunged below the $60 mark to have their wish. According to her: “preliminary estimates show that the break-even crude oil price at which the landed cost of PMS will equal our current price of N97 per litre so that there will no longer be subsidy is about $60 per barrel … It is only when the crude oil price (Bonny Light) falls below this level that the pump price of PMS (which includes N15.49 per litre distribution and Petroleum Equalisation Fund cost) can begin to come down”.

    On Monday last week, that moment came to fulfillment: the global benchmark Brent crude closed at $57.94 per barrel–more than two dollars ($2) below the threshold announced by the minister. The same oil sold for $115 a barrel (a reduction by more than 50 percent) in June last year – a little more than six months ago. Today, many oil producing countries have since reflected the new reality in their domestic fuel prices. These factors, including the fact that fuel price is known to be higher in Nigeria than all other OPEC members except Angola obviously makes the case for price reduction compelling at this time.

    Now, what is the Federal Government’s case for retaining the present pump price? The most obvious explanation is that the government believes that the current prices would be temporary. The other explanation stems from what the Petroleum Products Prices Regulatory Agency, (PPPRA)’s figures indicate. We refer to the PPPRA’s Expected Open Market Price (EOMP) template for Premium Motor Spirit (petrol) of last week which read N97.90 – meaning that the government still believes that there is a N0.90 kobo subsidy on petrol price. These apparently appear to inform the government’s strategy of treading cautiously on the matter of the current pricing template. There is a possible third factor – the possibility of shoring up government revenues from the differentials.

    But should these suffice to deny Nigerians of the benefit of a price reduction? We do not think so.

    However, it would appear that the issues are far more fundamental than the current fixation with fuel price reduction would ever sufficiently capture. Indeed, the issue of fuel price reduction merely underlies a profound pathology – the astounding myopia that has afflicted government’s policies in the downstream sector. It starts with the regime under which the Federal Government has long abdicated its responsibility to some dark invisible market forces. It extends to the rent-laden PPPRA template under which the nation is fleeced of billions annually. The pathology explains why OPEC’s sixth largest producer cannot refine sufficient crude for its domestic requirements; it explains the presence of  hordes of speculators and rent-seekers in the fuel distribution chain. It explains why the government would retain N458.68 billion in the 2015 budget to fund subsidy claims. The pathology – unfortunately – is at the heart of the current discourse – the question of whether Nigerians can ever benefit in any event of falling crude price, either now or in the future.

    Clearly, we find the debate misdirected. The reason is simple: with the current wholesale reliance on fuel imports, it should not be hard to appreciate why the landing cost of fuel would remain high to the extent that costs would depend on foreign currency movements, particularly the United States dollar. In the same way, it stands to reason that a country that imports nearly the whole of its fuel cannot devalue its currency by some 20 percent without expecting to suffer cost backlash. At nearly N180 to the United States dollar, for example, as against N160 a few months back, what it means is that the country would need more naira to import the same quantity of refined products. The pressure thus generated on the foreign exchange market translates to higher possibility of more losses in value for the national currency – a vicious cycle – a potentially loss-loss situation for the country and the people whether in the short or long run.  At this time, the debate ought to be how to get out of this vicious cycle.

    Lest we forget; the obverse side is that the government actually benefits from the devaluation – the direct result of more naira from crude sales; the same government that now seeks to deny citizens the benefit of cost reduction in oil.

    We continue to make the point that the greatest tragedy in all of this is the government’s pathetic response to the oil price slump. That the emerging fallouts from the oil price slump could not have been foreseen obviously beats imagination. And while much has been said about the current situation as providing the government a great opportunity to take another look at its policies in the sector, what we have seen thus far is the government limping on as if the problems would by themselves disappear without proactive steps taken by government to take them on.

    The solution, in our view, cannot be clearer today than it was 10 or 15 years ago: the nation needs new refineries to meet its domestic fuel requirements. That way, fuel pricing would not only be less subject to the vagaries of international currency fluctuations; it would also afford the nation immense opportunities to optimise earnings on the wasting asset.

  • Farmers not reaping from falling oil price, says don

    The fall in oil prices has not benefited farmers, a don has said. Prof  Ini  Akpabio, Dean, Faculty of  Agriculture, University of Uyo, (UNIUYO), blamed this on high cost of  production  and  middle-men.

    Akpabio  said  farmers were still suffering from high  cost of  transportation,  which  should have reduced if  there was a reduction  in fuel price.

    In most of the farming  areas, many small holders unaware of the falling crude oil price  and those who are informed are  at the mercy of agents that dominate the system.

    According to him, if fuel prices are falling, then it is possible farmers  will  see their  cost  of  production reduce.

    The   plight of farmers, he  noted,   is replicated across the  nation, since  the economy   relies on small farmers for 80 per cent of its food.

    According  to him, the  oil’s dramatic decline has not  been offset by currency weakness as  farmers  cannot  acquire  farming  machinery   and  could  cause  foreign investors to  retreat  from the  sector because  of fear of poor  return on investment.

    Also, while  the price of  agro export commodities,  such as   cocoa prices, had jumped by as much as 20 percent since October,  stakeholder said  cocoa farmers were  not  benefitting  as  most exporters are holding forward contracts entered into when a dollar exchanged for N160.  Nigeria is the fourth largest producer of cocoa in the world, after Ivory Coast, Ghana, Indonesia.

    Stakeholders  said   Nigeria  is    merely producing   and exporting   cocoa raw beans, without paying adequate attention to processing of cocoa to produce chocolates.

    For this reason, the exporters  receive three to six per cent of the final consumer price for a bar of chocolate.

    The  Executive  Director, Nigeria Export Promotion Council (NEPC) said   Nigeria should be processing chocolate instead of exporting it as raw beans. This requires investments in chocolate manufacturing companies and transforming the Export Enhancement Grant (EEG) to value addition.

  • TUC urges reduction of fuel pump price

    The Trade Union Congress (TUC) has called on the Federal Government to directs its appropriate agencies in the oil and gas sector to immediately lower the prices of petroleum products as it will ameliorate the sufferings of the masses.

    In a statement jointly signed by its President, Comrade Bobboi Bala Kaigama and Secretary-General, Comrade Musa Lawal, the group called for immediate reversal of the pump prices of petroleum products, stressing that the devaluation of the naira has weakened the purchasing power of Nigerians.

    He said: “Congress expresses concern that government has refused to reduce the prices of petroleum products even though the price of crude oil has collapsed in the international market, which was the reason given when it wanted to increase the price of fuel in 2012. We urge government to direct the appropriate agencies to immediately adjust the prices of petroleum products as it will ameliorate the sufferings of the masses.”

    He said TUC has put government on notice that following naira devaluation, the Congress is going to ask for wage increase to cushion its effect on workers. He drew government’s attention to a number of issues plaguing employers/employees relationship to ensure a friendly working environment this year.

    TUC said: “Worried about the impunity of politicians and mismanagement of the fortunes of the oil and gas sector, the Congress laments the way and manner our politicians go about their politicking.

    “Our major concern is that what is predominant today is use of state’s coercive power, especially the police and resort to use of touts and idle youths to molest political opposition and journalists.”

    On local content policy, he said: “it has been observed that since the policy came into place in 2010, there has been no yardstick to measure progress made as we have also  observed that the entrepreneurs that are being empowered are compromising employment standards and flagrantly breaching workplace rights and decent work principles with intimidation and myriads of victimisation.”

  • Oil price fall: LCCI backs govt’s policies

    Oil price fall: LCCI backs govt’s policies

    THE  Lagos chamber of Commerce and Industry (LCCI) has thrown its weight behind the fiscal and monetary policy responses by the government to keep the economy afloat in the face of falling oil prices.

    In a statement, LCCI Director-General Mr. Muda Yusuf said the fiscal and monetary policy responses by the government and the Central Bank of Nigeria (CBN) were inevitable, stressing that some of the policies were long overdue.

    He said: “The economic situation has again underlined the critical imperative of economic diversification. An economy that is diversified has a better capacity to withstand shocks. At every turn in our advocacies, we have canvassed the need for the creation of an enabling environment to enhance the productivity of enterprises and consequently ensure economic diversification.”

    On the measures, he said they included fiscal and monetary policies taken to stabilise the macro-economic conditions to minimise dislocations.

    These, he said, include reduction in international travels and trainings by Federal Government officials, tax on luxury items, and review of oil price benchmark to $73 from $78 in the 2015 Medium Term Expenditure Framework (MTEF).

    Others are renewed commitment to fiscal prudence, upward revision of revenue target for Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service.

    Yusuf said on the monetary policy front, some items, such as electronics, finished goods, information technology, generators, telecommunications equipment, and invisible transactions, were excluded from the official foreign exchange window.

    The LCCI said the implication is that transactions involving the enumerated items would be funded at a higher exchange rate from either the interbank foreign exchange market or parallel market.

    He recommended that several budget heads needed to be further scrutinised to ensure cost effectiveness and better transparency in the management of public finance. According to him, they include the: consolidated revenue fund charges, service wide votes, presidential amnesty programmes, capital supplementation and debt services.

    Others are refreshments and meals, foodstuffs and catering, honorarium and sitting allowance, welfare packages, repairs and maintenance. All these budget heads have substantial amounts voted for them in the budget annually. Some of the provisions do not reflect the desired prudence in the management of public funds. Huge savings will be made if a proper scrutiny of the budget heads is made, he warned.

    Yusuf regretted that the biggest platform for corruption in the economy today is the management of subsidy on petroleum products. The pressure it exerts on the government treasury is enormous, he warned.

    He called for an accelerated reform of the oil and gas sector and the passage of the Petroleum Industry Bill (PIB), which he said will mitigate the challenge the subsidy management poses for government finance.

    Furthermore, he cautioned that the tax yield in the economy is not commensurate to the magnitude of activities taking place in the economy.

  • Oil price slump…tourism to the rescue

    Oil price slump…tourism to the rescue

    The global oil price slump has forced the Federal Government to resort to austerity measures. Experts have called on the government to market tourism to enhance economic development beyond the national mono-product economy, using the Osun State example for tourism marketing, writes ADEDEJI ADEMIGBUJI.

    With the plunge in the crude oil price in the international market,stakeholders have asked governments at all levels to look beyond oil and reposition the tourism industry for global competitiveness. The call was made at this year’s Brand Journalists Conference, which held in Osun State with the theme: “Tourism Marketing as Catalyst for Economic Development”.

    As the major source of revenue, crude oil prices have been on the decline globally, since June, nearing $83 per barrel, down to about $32, or 28 per cent from its high point earlier in the year. The Bonny Light, Nigeria’s reference crude, is being sold at about $83 per barrel. This has forced the government to announce austerity measure with the Minister of Finance and the Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, saying the country would from this month, start to feel the impact of the falling global oil prices.

    She noted that the country needed to prepare for tougher times ahead by reviewing its expenditures and building economic buffers through budgets that would be based on modest oil prices.

    However, stakeholders at the conference were of the opinion that this measure could have been avoided if tourism marketing had been taken serious by governments at all levels.

    The Nigerian Guild of Editors’ President, Mr. Femi Adesina, said the failure of the government to heed the clarion call on diversifying the nation’s economy by promoting tourism is one of the reasons behind the effect of oil price slump on the nation’s economy.

    “For years, running into decades, tourism has been identified as one of the veritable alternatives to oil as a major revenue earner for the country. Many countries of the world do not have natural resources, and depend largely on earnings from tourism. Israel, despite being beleaguered politically and surrounded by hostile neighbors, thrives on the marketing of its historical sites. All year round, tourists and pilgrims troop into Israel to visit sites venerated and considered holy by the major religions of the world,” he said.

    Citing the potential of the sector to boost the gross domestic product (GDP), he revealed that between 2003 and 2004, Australia’s inbound tourism consumption to GDP was $7.6 billion. “The same happens in many other countries of the world. But here in Nigeria, our potentials lie fallow, dormant and in most cases, untapped,” he explained.

    Adesina noted that some of the major barriers the government has allowed against tourism marketing are poor infrastructure, insecurity, poor health care and lack of political will to use oil proceeds to develop tourism in the country.

    As a result, Osun State Commissioner for Home Affairs, Culture & Tourism, Omo-Oba  Adetona Sikiru Ayedun said many of the barriers have led to diminished economic growth, reduced profitability in the travel and tourism sub-sectors, which many more countries are seriously adopting as a viable development option for income generation.

    He said the state government led by Ogbeni Rauf Aregbesola has set the target of N15bilion revenue from tourism by next year.

    He said: “Our vision is to tap into over $3 trillion revenue available globally through tourism. The Osun State government led by Ogbeni Adesoji Rauf Aregbesola targets N15 billion revenue from tourism by 2015. This projection is technically and consciously proved by our robust gains and interrelationship with tourism and culturally endowed nations like Cuba.”

    While addressing these challenges, he said the state government has aggressively improved infrastructures such as roads, power and security after a tour of Cuba where the government got exposed to the idea of marketing of tourism. “Our business visitation to Cuba has exposed us to ideas on how tourism and culture could be promoted as revenue earners for Osun State in particular and Nigeria in general. This is what we are doing and we are reaping benefits from the actions,” he said.

    The state Commissioner for Information and Strategy, Sunday Akere said some countries rely solely on tourism as the bedrock of their economy hence, the need for government to look beyond the curse of oil and market tourism as new economy driver.

    In repositioning a place as a tourism destination, Adesina, however, suggested certain critical factors that could be called irreducible minimums. They include:

    Marketing strategy

    Akere asked rhetorically: “Does as an army go to war without first formulating a strategy to combat the enemy? Does a soccer team enter the pitch for a competitive game without a strategy to rout the opponent? Does a pilot get into the airspace without first having a flight plan? So, can you not also reposition tourism destination without marketing strategy? How do we do it? When? Where? To which end? Who are the people that will do it? What are the resources needed? What are the tools to employ?”

    Adesina said all these are germane questions critical to finding answers to the challenges of marketing tourism. “But as said earlier, Nigeria is not lacking in recommendations and theoretical frameworks. A lot of them have been codified and outlined over the years, but are gathering dust in the shelves of our ministries, agencies and parastatals. Now is the time to dust them up, update them, and begin to run with the vision. But definitively, we must formulate what should be our national strategy for repositioning Nigeria as tourism destination,” he noted.

    Asking government to employ push and pull marketing strategy, Adesina said government should find out what motivates tourists in their choices of destination.  “These are called the push and pull factors, and Nigeria must necessarily take care of them, if she would take her place as one of the world’s favorite tourism destinations,” he explained.

    According to him, some of those push and pull factors include infractructure, security, cost and political stability.

     

    Infrastructure

    “Do we have the roads, the hotels, the tourist sites, the airline services, the water transport, and other means of mass transport that can support tourism? These Nigerian roads that have become death traps? Roads where you spend hours on end for journeys that should just take about half an hour? An airline industry where flights are delayed endlessly, or cancelled whimsically ‘due to operational reasons?’ Or waterways where ferries capsize at frightful intervals? All these are infrastructure that support tourism, and to move forward, Nigeria must devote a large chunk of its annual budgets to infrastructure upgrade,” Adesina said.

    Security

    He continued: “Can there ever be tourism in the face of massive insecurity characterised by insurgency, kidnappings, robberies on highways, and murders? Not at all. The tourist wants rest, recreation, relaxation, fun, and an experience of a lifetime. But he does not want to lose his life in the process. As long as Nigeria fails to solve the insecurity problem, so long will the tourism Eldorado elude her. Reports of insecurity, particularly of terrorism and kidnappings, elicit international attention. And Nigeria has a surfeit of those kind of reports now. It will affect our fortunes as a tourism destination, no matter how hard we market ourselves. Get security right, and the tourists will flock in.”

    Cost

    While noting that tourists want rest and relaxation, but they do not want to pay an arm and leg for it, Adesina said “costs of goods and services are rather prohibitive in Nigeria, compared to other countries on the continent, and even in the world”.

    He said despite the rebasing of Nigeria’s economy and rated as the largest in Africa, the impact on goods and services is still fetched. “Do you notice that our top hotels perhaps, charge the highest rates in the world? Do a comparative study, and you would see the truth in it. The tourist wants quality, but at reasonable prices. Some families save round the year, in order to take a holiday. Should they then land in the debtors’ prison after the holiday, because they have been completely fleeced of their earnings? For Nigeria to compete as a global tourism destination, government must work harder to keep the economy on an even keel, so that prices of goods and services can be stable, and within reach,” Adeshina explained.

    Political stability

    With political instability posing a threat to tourism growth, Adesina said it will be foolhardy for any tourist to visit a crisis-proned tourism destination such as Nigeria. He said: “Which tourist wants to visit a country in turmoil, or one that could disintegrate at the next hour? Not many. Which tourist wants to visit a country where lawmakers are seen on global TV being tear-gassed, and scaling dangerous fences to get access into parliament? Which tourist wants to visit a country where elections are followed by flares of violence, with many lying dead in the streets?” he asked, warning that Nigeria must get her politics right. “It has grave implications for tourism,” he warned.

    He, however, said “when tourists get all the above and more, what you get is loyalty, and return visits,” there will also be massive recommendations to other people, which will drive up traffic. “There is nothing better than a fulfilled tourist,” Adesina added.

    Why reposition?

    As oil prices continue to decline at the international market with global competitiveness in tourism sector across the globe, Adesina said it is a must for the Nigerian government to reposition tourism as a catalyst for economic development.

    “Why reposition? Is it by force? Well, it is by force. Without repositioning, we will not get the best that is possible from our tourism. There is now increasing worldwide competition, with each country putting its best tourism foot forward. Also, we must reposition because the preferences of tourists keep changing. What you offered a year or two ago may not suffice for today or tomorrow,” he said.

    Again, we must reposition because having a fixed image would not promote a destination effectively. That is why the world’s greatest brands keep coming out with different types of advertisements and promotions. Repositioning allows you to rejuvenate your tourism destination. It also allows you to know your client, his needs, motives, drives, purchasing behavior, and how you can respond appropriately,” he concluded.

     

  • Experts praise reduction of cement price by Dangote

    Experts praise reduction of cement price by Dangote

    EXPERTS have hailed the reduction of cement price by Dangote Cement Plc to N1,000 from N1,800. They said it is a good omen which  would encourage more developments and, by extension, more jobs not only for professionals but artisans who have been out of jobs because of stalled projects. National President, Nigerian Institution of Structural Engineers (NIStructE), Dr. Samuel Ilugbekhai, said the price reduction is an achievement which would benefit many, directly  and  indirectly.

    He said: “By this singular act of patriotism, cement is being made more available and more affordable for developmental purposes. Coming barely a week after the conference of the Nigerian Institution of Structural Engineers (NIStructE) on “The Effect of Cement Strength  on Concrete Performance” where we called on the regulating authorities to lay more emphasis on the manufacturing of cement to ensure that they meet national and international standards,  I am particularly gladdened by this development and I humbly encourage all other cement manufacturers to reduce their prices so that cement will be more affordable to  more Nigerians across the country.”

    President, Building Collapse Prevention Guild, Mr. Kunle Awobodu, hailed the price reduction, noting that it was part of their campaign which they recently took to the National Assembly when they presented a position paper to the Upper Legislative Assembly adhoc committee on cement. He said part of their argument was that cement is capable of causing building collapse due to its exorbitant price as builders may be tempted to cut corners.

    Awobodu, who is the third vice president of the Nigerian Institute of Building, canvassed a situation where a bag of cement will not cost more than N800 so that many can afford it. He regretted that the product was more expensive in Nigeria  of all cement producing countries, and hailed the reduction. He encouraged other companies to follow the example of Dangote Cement Plc.

    A town planner and immediate past Secretary General, Association of Town Planning Consultants of Nigeria (ATOPCON),  Mr. Ayo Adejumo said the reduction in the price of cement will increase activities in the construction sector. He noted the high number of abandoned projects in the country which is tied to high construction cost.