The recent announcement by the Petroleum Products Retail Outlets Owners Association (PETROOAN) in which they tipped off Nigerians about plans by the federal government to increase the pump price of petrol to between N180 and N201 has triggered reactions from Nigerians.
This was further corroborated by the minister of state for petroleum resources, Chief Timipre Sylva, who at the launch of the Nigerian Upstream Cost Optimisation Programme (NUCOP), advised Nigerians to brace up for higher fuel prices given the increase in the price of crude oil ($60 per barrel) in the international market.
He said with no provision of subsidy in the 2021 budget, the Nigerian National Petroleum Corporation (NNPC) cannot continue to bear the cost of under-recovery. According to available information, the landing cost of petrol is now at over N179 per litre, while the expected Open Market Price (OMP) is about N202 per litre.
We recall that in March 2020, the federal government claimed that it had deregulated the downstream sector of the petroleum industry. But from indications, the Premium Motor Spirit (PMS) market is not so deregulated.
In the opinion of this newspaper, this is not the time for any further increase in the price of petroleum products because of the negative effect of such a decision on the economy and, by extension, the life of the ordinary Nigerian.
NNPC, barely two months ago, had cut N2 from N155.17 ex-depot price of petrol earlier announced before the Yuletide. With that new price, a litre of petrol sold for between the N162 and N167 per litre price band. A development that many believed was the final act of removing the phantom subsidy on petroleum products.
Unfortunately, now, at a time when palliatives are needed to cushion the effects of the current severe economic hardship, a new price of N180/litre is reportedly being canvassed by marketers.
The specifics of this “distribution margin” for every litre of petrol, according to the marketers, include retailers charge, transporters’ allowance, bridging fund, dealers’ charge, marine transport average, and administrative charge. This, in our view, is outrageous!
First, if an additional cost is indeed required for the marketers to break even, why are some of them currently selling at N162 per litre instead of the maximum N167 approved by the government? Even the most elementary interest in the fuel supply chain has shown how opaque and corrupt it is.
The details above, of course, expose the unpatriotic manipulations by players in the fuel importation and distribution business, which more or less determine the price of petrol. Adding a myriad of charges to the actual cost of petrol by different interest groups is tantamount to fleecing Nigerians. And this should not be allowed to continue.
Perhaps, the only charge that can be justified is the administrative charge. All other charges are borne out of corruption, which unfortunately, are passed on to the consumers.
How, for instance, could the amount paid as transporters’ allowance be explained? Is the money meant for the transport owners or the drivers? How come there are transport charges when the tanker owners are paid for the job of fuel distribution?
The same question hangs on dealers’ charge. Indeed, there are too many questions! And no one is giving any answers. Experts conjecture that in matters of oil pricing, politics overrides economics. Otherwise, the extra cost on every litre of fuel would have come under the scrutiny of the government of the day. If it is not, then on what basis was approval given for the numerous charges even in the face of government’s war against corruption.
In India, for instance, the final price of fuel is determined by three approved components, namely, commission to petrol pump owners, excise duty and value added tax on gross price including excise, which are charged minimally. In the case of Nigeria, the six components that have bloated the fuel price apparently go into private pockets. Matters like this should, therefore, engage the attention of President Muhammadu Buhari who should effect changes in line with the anti-corruption crusade of his administration.
This situation obviously presents a very delicate balance between economic and commercial considerations on one hand and the social and welfare considerations on the other. To that extent, therefore, the challenge before policy makers is to locate the balance.
In our opinion, the solution lies on how fast Nigeria is able to ensure a domestic refining of petroleum products as it remains a very critical factor in ensuring the sustainability of the deregulation policy.
It is on this basis that we urge all stakeholders in the oil sector to avoid plunging the country into needless socio-economic crisis that could worsen the existing problems of inflation and insecurity.
