Fuel price increase

Daring Nigerians And Endangering Democracy

Part 1: The Cause

In a move regarded by many as daring Nigerians and endangering Nigeria’s fragile democracy, the federal government, through the Petroleum Ministry increased, yet again, the price of Premium Motor Spirit (PMS) from N125 to N151 at Nigerian National Petroleum Corporation (NNPC) retail outlets and N162 at Independent Marketers outlets.

Petroleum Resources’ Minister of State, Timipre Sylva said the decision was taken against the backdrop that the country cannot, at this time, continue to afford the subsidy, spending over one trillion naira on subsidy every year. According to him, the government decided it was time to deregulate, in order to save the nation scarce foreign exchange.

“What that meant was that government stood back from the business of importing and supplying product at the pump. We are no longer fixing prices. That is what deregulation means. We have stepped back and we are allowing market forces to determine the price at the pump. If you noticed when the crude oil price went down earlier in the year, it reflected at the pump…And today, if the crude oil price goes down, it will reflect at the pump. And when crude oil price goes up, then it will reflect at the pump.” He said.

Reactions from Civil Societies, Labour Unions and the general Public have been trailing the recent fuel hike.

Lagos State Chairman of the National Union of Petroleum and Natural Gas Workers,(NUPENG) said as long as the country continues to import refined products, the nation will never escape the mess she has found herself today.

 “In fact, this may not be the end of it,.” pPredicted the Lagos NUPENG Chairman.

 The road to the crossroad began in March when the Federal Government through the Petroleum Products Pricing Regulatory Agency (PPPRA) officially commenced a petrol pricing regime on March 19, 2020 that saw to the halt in petrol subsidy.

Through its pricing regime, PPPRA ensured that petrol prices were fixed on a monthly basis in accordance with the fluctuation of crude oil prices in the market.

Barely a month after, Nigerian National Petroleum Corporation (NNPC), Group Managing Director (GMD), Mr Mele Kyari, leveraging on the low price of crude oil and petroleum products, announced that the era of subsidizing the pump price of petrol was over.

Hinting at a possible deregulation of the downstream oil sector, in April this year, NNPC GMD, Mele Kyari, said the Federal Government had eliminated subsidy and under-recovery in the industry.

Making the disclosure on the official Twitter handle of the NNPC after he appeared in a television interview, an excited Kyari said as at April 2020, subsidy/under-recovery was zero.

“Going forward, there’ll be no resort to either subsidy or under-recovery of any nature. NNPC will just be another player in the market space. But we’ll be there for the country to sustain security of supply, at the cost of the market. As crude oil price slumped in the international market due to the rampaging COVID-19 pandemic, the Federal Government responded by reducing the pump price of petrol from N145/litre to N125/litre in March,.” He said.

According to him, the national oOil company (NOC) further reduced the price to N123.50/litre on April 1, after monitoring developments in the international oil market.

Promising that the Oil firm has laid a solid framework against the possibility of another round of petrol scarcity, he said the State-owned oOil firm has a very robust products supply and distribution mechanism; from the loading depots up to fuel stations nationwide.

“We also have very good understanding with our strategic partners: the governors, marketers, depot owners, PTD, etc. There are no issues whatsoever,.” hHe assured.

Early in September, data contained in NNPC’s latest June 2020 financial and operations report of NNPC showed that the corporation incurred N5.348bn as subsidy on imported petrol in June. Also, further review revealed that in January, February and March 2020, the oil firm incurred N43.31bn, M20.68bn and N37.66bn respectively as under-recoveries.

It, however, posted zero under-recovery in the months of April and May 2020, based on receipts and payments for the months.

But in June 2020, it incurred over N5bn as under-recovery, a development that showed it spent that much on petrol subsidy in that month.

 Explaining the development, Group General Manager, Group Public Affairs, Division, NNPC, Kennie Obateru, said the return of under-recovery in June was due to the payment for stock held by marketers at the onset of the removal of subsidy by the Federal Government.

“Since the subsidy removal started with reduction in pump price, marketers have been paid the differential of the PPPRA verified stock they held and it is spread over a period of six months,” he said

Almost immediately, oOil marketers debunked the claim as they denied receiving petrol subsidy payments in June 2020 as disclosed by the Nigerian National Petroleum Corporation (NNPC) in its latest operations report.

According to the Independent Petroleum Marketers Association of Nigeria (IPMAN) and the Petroleum Products Retail Outlets Owners Association of Nigeria, they had not received any subsidy payments from government adding that Federal Government had declared that the downstream oil sector had been deregulated, since March this year and as such there was no need for petrol subsidy.

Somehow, it would appear that rather than escalate the back and forth on the claims and counter claims, both NNPC and the Marketers made up, sweeping such serious allegations under the carpet to proceed to the next level of their relationship. They increased the price of the product and all hell, predictably, was let loose as usual.

As more marketers raised the pump price of Premium Motor Spirit (petrol) on Thursday September 3,2020, the Nigeria Union of Petroleum and Natural Gas (NUPENG) Workers and the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) stated their opposition to the deregulation of the downstream petroleum sector, claiming it was ill-timed and ill-thought-through, since the country is still relying on imported refined products.

Unsure of, the direction of the new pricing rule, the Marketers accused the Petroleum Products Pricing Regulatory Agency (PPPRA) of leaving operators confused, as they were yet to be issued the guiding retail petrol price for the month as at September 3.

Although it released the ex-depot price for the commodity, the PPPRA hwas remained silent regarding monthly retail price guide and increased the ex-depot price by N6 to N138.62/litre for the month, a development that prompted marketers to hike the pump price of the product to between N148 and N150/litre.

Interpreted to mean that they should go ahead to fix the price themselves, PPPRA’s silence prompted the mMarketers to push the pricing envelop further from N150 to N151/N162.

Chairman, Major Oil Marketers Association of Nigeria, and Managing Director/Chief Executive Officer, 11Plc, Tunji Oyebanji, warned that there is a need for some clarity.

“If we are to fix the price of the product, we should be told so. There are a lot of confusion and people are not clear as to the direction. All we have is silence,” he cautioned.

What has remained an issue has been the direction of the deregulation of the Downstream of the hydrocarbon industry. A concern raised by the General Secretary of, NUPENG, Mr Afolabi Olawale, who said any form of deregulation based on the importation of petroleum products would not help Nigerians.

“Our position is that we don’t support any form of deregulation that is based on importation. We support deregulation that is based on local refining of products. If we are refining in the country, a lot of costs will be taken away and Nigerians will be able to benefit. But as long as we are not refining, Nigerians will keep experiencing an increase in fuel prices if crude oil price continues to rise. Nigerians are suffering; the country is in a dire situation, considering the impact of the COVID-19 pandemic. Things are hard, and we add a higher cost of transportation to it; it is going to be a very terrible period for Nigerians,.” sSaid Olawale.

PENGASSAN’s National Public Relations Officer, advised Federal Government to ensure that the nation’s refineries are fully commercialized using the Nigeria Liquid Natural Gas (LNG) model.

The response of the National Assembly signaled by the Minority Leader of the House, Ndidi Elumelu, was expected even though it took sometime for the larger majority of the two Chambers to react.

In a statement issued on Wednesday, September 2, 2020, titled, ‘Reps Caucus Demands Halt in N151 Fuel Price Increase’, Elumelu was unequivocal in describing the increment as unacceptable.

Worried it could result in an increase in the already high cost of consumer goods and services and worsen the current economic hardships being suffered by Nigerians, he said the minority caucus in the House of Representatives rejects the announced increase in the pump price of fuel.

“This is because such increase will directly result in more hardship on our citizens, particularly at this critical time when a majority of Nigerians across the country are struggling to survive under the burden of high cost of living and low purchasing power occasioned by the prevailing economic challenges. Any increase in the cost of an essential commodity like fuel will, therefore, bring more hardships to the people and, as such, should not be contemplated,.” He warned.