Nigerians are still in shock and disbelief at the sudden hike in the price of Premium Motor Spirit (PMS) also known as petrol. The FG announced yesterday afternoon that they are fully deregulating the downstream oil sector and now petrol would sell at about N135 to N145. Fuel scarcity had hit the nation’s capital, Abuja, twenty four hours before this announcement.
Government also stated that any Nigerian firm could now import the product, subject to existing quality specifications and other guidelines issued by regulatory agencies.
In a statement in Abuja, the Petroleum Products Pricing Regulatory Agency, PPPRA, the agency responsible for determining products prices in the oil sector, said the decision to allow marketers fix the price within the new price band of N145, became imperative in the face of extreme difficulties faced by importers in sourcing foreign exchange. According to the PPPRA, to meet the consumption demand of the country, importers will henceforth be permitted to source for their foreign exchange requirements from secondary sources.
In the statement signed by Acting Executive Secretary, Mrs. Sotonye Iyoyo, the PPPRA said with immediate effect, the new price band for PMS shall be at a maximum of N145 per litre, noting, however, that NNPC retail stations on the outskirts of major cities were advised to sell at a price lower than N145 per litre. She said: “We are conscious of the difficulties that Nigerians have been going through in the last few months, and to ameliorate this situation, we shall continue to modulate pricing in accordance with prevailing market dynamics, thereby ensuring fair value to all citizens.”
Also, briefing newsmen at the State House, Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, yesterday, defended the jerking up of pump price of PMS, saying it was the only way out of the exorbitant prices of between N150 to N250 which Nigerians are subjected to at filling stations across the country.
He stated that the new policy would lead to improved supply and competition and eventually drive down pump prices, as experienced with diesel. In addition, he argued that the increased price would also lead to increased product availability and encourage investments in refineries and other parts of the downstream sector, while it would also prevent diversion of petroleum products and set a stable environment for the downstream sector in Nigeria.
He, however, stated that Federal Government had articulated many social protection programmes in the 2016 budget to cushion the effect the hike might have on Nigerians. Rising from a meeting chaired by Vice President Yemi Osinbajo, which also had other stakeholders, including the leadership of the Senate, House of Representatives, Nigerian Governors Forum, and Labour Unions (NLC, TUC, NUPENG, and PENGASSAN), at Aguda House, official residence of the Vice President, Kachikwu said:
“The reason for the current problem is the inability of importers of petroleum products to source foreign exchange at the official rate due to the massive decline of foreign exchange earnings of the Federal Government. “As a result, private marketers have been unable to meet their approximate 50 per cent portion of total national supply of PMS.” Highlighting contents of the briefing, Kachikwu said:
“We have just finished a meeting with various stakeholders presided over by His Excellency, the Vice President. The meeting had in attendance the leadership of the Senate, House of Representatives, Governors Forum, and Labour Unions (NLC, TUC, NUPENG, and PENGASSAN). “The meeting reviewed the current fuel scarcity and supply difficulties in the country; exorbitant prices being paid by Nigerians for the product, ranging, on the average, from N150 to N250 per litre currently.
“The meeting also noted that the main reason for the current problem is the inability of importers of petroleum products to source foreign exchange at the official rate due to the massive decline of foreign exchange earnings of the Federal Government. As a result, private marketers have been unable to meet their approximate 50% portion of total national supply of PMS.
“Following a detailed presentation by the Minister of State for Petroleum Resources, it has now become obvious that the only option and course of action now open to government is to take the following decisions: NEW FUEL PRICE—Minister of State, Petroleum, Dr. Ibe Kachikwu, briefing newsmen on the new fuel price, yesterday, in Abuja.
“In order to increase and stabilise the supply of the product, any Nigerian entity is now free to import the product, subject to existing quality specifications and other guidelines issued by regulatory agencies. “All oil marketers will be allowed to import PMS on the basis of FOREX procured from secondary sources and accordingly PPPRA template will reflect this in the pricing of the product.
“Pursuant to this, PPPRA has informed me that it will be announcing a new price band effective today, May11, 2016 and that the new price for PMS will not be above N145 per litre.
“We share the pains of Nigerians but, as we have constantly said, the inherited difficulties of the past and the challenges of current times imply that we must take difficult decisions on these sorts of critical national issues.
“Along with this decision, the Federal Government has in the 2016 budget made an unprecedented social protection provision to cushion the current challenges. We believe in the long term, that improved supply and competition will drive down prices.
“The DPR and PPPRA have been mandated to ensure strict regulatory compliance including dealing decisively with anyone involved in hoarding petroleum products.” It’s inevitable — LCCI Reacting to the development last night, the Lagos Chamber of Commerce and Industry, LCCI, in a statement by its Director-General, Muda Yusuf, said:
“The decision by the Federal Government to liberalize the petroleum downstream sector is inevitable given the acute resource constraint that the country is faced with at this time. “The overregulation of the sector and the subsidy regime had put enormous pressure on government finances and on our foreign reserves. It was evident that the policy choice was not sustainable. The review is in the long term interest of the economy and the people.
“Petroleum subsidy management has been characterised by serious transparency issues for several decades. There are two components of the subsidy phenomenon.
“The first is the actual subsidy, which is the differential between the pump price and the landing and other costs of fuel. The second (and more disturbing component) is the blatant corruption inherent in the fuel subsidy regime.
“For several years, the Nigerian economy suffered severe bleeding from this phenomenon; with subsidy payments in the one trillion naira threshold, and even more. In an economy with huge deficit in economic and social infrastructures, it was simply scandalous. It is in the overall interest of the economy and citizens for it to be discontinued.
“One of the critical elements of the Oil and Gas Sector reform, particularly the downstream sector, is the complete deregulation of the sector. This will create a number of advantages for the economy. It will free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, education sector etc.
“The deficiency in all of these infrastructure areas is phenomenal. Fixing infrastructure will greatly improve productivity and efficiency in the economy and impact positively on the welfare of the people. “It will boost private investment in the downstream oil sector especially in petroleum product refining. This will ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as foreign reserves.
“It will eliminate the rampant patronage, rent-seeking activities and corruption that currently characterise the downstream oil sector. It will improve product availability and eliminate fuel queues. It will create more jobs for the teeming youth of the country in the downstream oil sector as investment in the sector improves.
“However, for the objectives of the new policy to be achieved, the current foreign exchange policy needs to be urgently reviewed to improve liquidity and transparency in the foreign exchange market. Only a limited success will be achieved if the current rigidities in the management of the foreign exchange market persist.”
We shall resist the increase —NLC
In a swift reaction, the Ayuba Wabba faction of the Nigeria Labour Congress, NLC, rejected the increase and vowed to resist it alongside its civil society allies, calling on government to revert the hike to avoid a nationwide mass protest and industrial unrest. On its part, the Joe Ajaero faction, equally rejected the hike, warning that there would be massive resistance by organized labour jointly to ensure that this further injury and hardship on Nigerians does not stand. IPMAN commends FG Alhaji Abubakar Maigandi, the Vice President, Independent Marketers Association of Nigeria (IPMAN), has commended the Federal Government on the new pump price of petrol. Maigandi told the News Agency of Nigeria(NAN), yesterday, in Abuja that the decision would help to put to an end the persistent petrol scarcity in the country.