Tougher times as petrol sells for over N600

Nigerians saw the second hike in petrol prices on Tuesday since the removal of subsidy, with the product being sold for as high as N617 per litre by the Nigerian National Petroleum Company Limited (NNPCL).

Before the removal of petrol subsidy by President Bola Tinubu, the official pump price of petrol was N184-N196 per litre. It was raised to N488-N557 by the NNPCL on May 31.

On Tuesday, the national oil company increased the pump price at its stations in Abuja to N617 and other marketers across the country also adjusted their prices. In Lagos, Mobil station along the Lagos-Ibadan Expressway was selling the product at N568.

Samson Haruna, a taxi driver in Abuja was forced to return home because he couldn’t afford to buy the 30 litres he used to buy at about N16,200.

Addressing the reasons behind the sudden hike in prices, Chinedu Okoronkwo, president of the Independent Petroleum Marketers Association of Nigeria (IPMAN), in an interview monitored by BusinessDay, said the price went up because of the market fundamentals that could not be controlled locally.

He said the crude oil market is operating in dollars, which is now over N800, adding that the price of Brent crude had risen above $79 per barrel.

“In a deregulated regime, what determines the price is cost; the product is imported and the volatility is there; you must get the price at the depot, then you begin to add up other variables that will bring the escalation of the price. A lot of things are suffering now because we cannot control market fundamentals,” he said.

According to experts, the hike in petrol prices will cause another round of increases in the prices of goods and services and worsen the cost of living crisis in the country, with income earners and small business owners worst hit.

Damilare Asimiyu, a macroeconomic strategist and head of investment research at Afrinvest West Africa, told BusinessDay that the near term outlook is not good for Nigeria, especially for the middle and low income earners, not excluding the high income earners who still have some form of buffers to cushion the effect of these policies.

“It is not going to be easy for households; the implication of what has happened now is that people cannot conveniently feed twice and when that happens, it gives room for more social vices,” he said.

Asimiyu said data shows that Nigeria has 133 million people who are multidimensionally poor while an additional four million was captured in the poverty net in the first half of the year.

He added that in the space of two months, the country has had hikes in energy sources that affect virtually everybody and other things like transportation and food.

He added that it was right to remove subsidy but the inability of the government to strike a balance between providing palliative measures that will sufficiently cushion the pain on the low income ends and the radical phase of removing it “is a serious mismatch”.

“Loading this whole subsidy removal pain on Nigerians at once is very devastating, given the kind of experience we had in H1, especially as there are no in-house shock absorbers; hence it should have been a phased increase with buffers rolled out in between,” he said.

He said having functional refineries and the planned implementation of the Compressed Natural Gas (CNG) project could have helped to cushion the effect of these policies.

He said the government could have given people an option to convert their cars for free or at a subsidised rate to increase the chances of actualising the project.

Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, said the current price hike is very difficult to justify, especially at a time when economic hardship being experienced by most Nigerians is already at an unbearable threshold.

“The livelihoods of many citizens are already at risk. Poverty situation has been aggravated; the government needs to intervene urgently to alleviate the sufferings of the people,” he said.

The Civil Society Legislative Advocacy Centre has decried the further hike in petrol pump prices.

“The government is clearly insensitive to the plight of the growing number of Nigerians slipping into poverty daily as a result of its harsh policy directions,” Auwal Ibrahim Musa (Rafsanjani), executive director of CISLAC, said.

According to Rafsanjani, Nigerians still remain the ultimate burden bearers of the government’s failure to take effective preliminary, decisive and demonstrable actions towards addressing oil and gas sector challenges.

For him, this has huge implications for businesses that rely on diesel and petrol to power their businesses.

He said: “Citizens have been taken for a joy ride and lied to at every step of the way by various beneficiaries and stakeholders in the value chain.

“A major effect of the subsidy removal is its knock-on effect on prices of goods and services. Increased transportation costs due to the high fuel prices, directly impact agricultural production and have implications for food security.”

He said the government must “show real concern and take urgent actions to cushion the effect of its decision which is perpetuating poverty and inequality”.

“This is widening the country’s already-existing income inequality with low-income citizens and vulnerable segments of society facing greater financial strain to meet their basic food needs,” he added.

According to Rafsanjani, less people can afford petrol to meet their transportation, home-powering and other needs, and small and medium-sized enterprises are facing difficulties in accessing affordable power.

He said the government has so far demonstrated a lack of interest in people-centred programmes that could help reduce poverty, economic inequality and economic suffering.

He said: “At the same time this government is inconsistent in the application of its ‘austerity measures’ as it is pursuing outrageous, unsustainable, unjustifiable and reckless spendings at the expense of the welfare of its citizenry.

“The government should not take for granted the patience of poor Nigerians who reluctantly bear the dire consequences of the over 300 percent fuel price increase due to the subsidy removal, as part of the sacrifice awaiting when the government would have settled to come up with ameliorative measures for the citizens.”

According to experts and industry stakeholders, this discomfort could have been avoided if the federal government had hastened the transition from petrol to CNG.

The IPMAN president noted that the most sustainable way to relieve the country from the volatility of a deregulated market is to embrace alternatives such as CNG.

“Going forward other alternatives like the CNG has been proffered which is the only breather that this nation needs to vigorously look into; What is needed here now is for us to have an alternative and that is CNG for now, there could be other energy mix that could help this country, every effort must be geared towards bringing this alternative,” Okoronkwo said.

Despite kicking off in 2020, the succour expected from using CNG may not come as early as necessary due to issues around poor planning and infrastructure deficit, among others.

This becomes more apparent seeing that the autogas project, which was launched December 2020, is yet to achieve half of its target from the takeoff stage – that is the conversion of one million cars. Till date, the ministry of petroleum resources maintains that only 1,000 cars have been converted.

Read also: Top CNG Cars in 202 – Say goodbye to fuel prices

Ayodele Oni, partner, energy practice group at Bloomfield Law Practice, told BusinessDay that although the project commenced with very good intentions, its implementation is challenged, which has to a large extent disincentivised the project.

“The project has not been able to deliver on its set targets so far for varying reasons such as lack of decisive implementation, inadequate infrastructure (gas development infrastructure and vehicle-capacity infrastructure), lack of sufficient investment in Nigeria’s petroleum sector, inadequate funding and tough economic realities, increasing cost of gas, amongst others,” he said.

Godswill Ihetu, former MD of Nigeria Gas Company, in a BusinessDay column, said the withdrawal of subsidy on petrol provides an opportunity for the authorities and businesses in Nigeria to think outside the box in looking for options, adding that the country should take advantage of the funding available to African countries in addressing cleaner and cheaper alternative transportation and energy sources.

“We should also learn to implement policies that are in our Nigerian Energy Transition Plan, some of which have been in our statute books for years, and are begging for implementation,” he said.