Difficult times are here and any pretension to the contrary has been ripped to shreds with Wednesday’s resolution of the governors giving full backing to complete deregulation of the downstream sector of the petroleum industry, which in effect may jerk the pump price of petrol to N385 per litre.
The masses will face more challenging times in the coming months as government closes in on resolving the lingering downstream market deregulation crisis.
Attempts to remove subsidy on the Premium Motor Spirit (PMS) had severally been stalled with the government and organised labour locked in endless negotiation.
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But on Wednesday night, the cash-starved governors recommended the immediate removal of petrol subsidy and proposed an over 130 per cent pump price increase, from N162 per litre to between N380 and N408.5.
Stakeholders have raised questions on how the governors arrived at their decisions, adding that the move implies price-fixing, which is against the principle of deregulation. They are also worried about the impact of such development on the country’s inflation and the purchasing power of Nigerians already affected by the growing devaluation of the naira.
They insisted that the recommended pump price was coming at a time the masses needed more support. They also described the price range as outrageous and lacking in justification.
However, stressed that the move could bring some level of uniform pricing in the West African bloc and stop the smuggling of fuel to neighbouring countries. The Guardian had reported that over 33 million litres, translating to over N70 billion monthly are being smuggled out of the country.
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The Minister for Petroleum Resources , Timipre Sylva , in March 2020 announced the deregulation of the downstream sector to commence removal of subsidy but the labour unions locked horns with the government using the argument of rising inflation and impact on electricity tariff and pump price of petrol.
Petroleum Products Pricing Regulatory Agency (PPPRA) in March had released a pricing template showing that the retail pump price should range from N209.61 to N212.61 per litre. The template was pegged on an average oil price of $62.22 per barrel for February and an exchange rate of N403.80 to a dollar.
Also in March, the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mele Kyari, said the actual price of petrol should be between N211 and N234 per litre, given the exchange rate and crude oil price.
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At the time of this report, crude oil hovered around $66.38 per barrel and the exchange rate on the Central Bank of Nigeria’s (CBN) special window stood at N408 to a dollar. The indexes, therefore, brought retail pump price in the country to a higher band of about N250 per litre, which is inclusive of extant charges, like bridging fund, wholesalers’ margin, marine transport average, administration charge, transport allowance and retailers’ margin.
Should the price move to N380 per litre, the governors would have succeeded in adding N130 on every litre of petrol. Given that the country’s average actual consumption stands at about 60 million litre daily, the governors would have taxed consumers to the tune of N234 billion monthly.
