When petrol prices rose to N600 in many Nigerian cities, the new gig in town was the conversion of petrol generators to run on cooking gas, but the price of 12.5kg of the commodity could hit N18,000 by December.
Nigerians are facing the brutal consequences of government policies and bold decisions that have been described as lacking adequate planning and detailed consequence management.
President Bola Tinubu, while ringing the NASDAQ closing bell on Wednesday, touted his reforms in removing subsidies and unifying different official rates to make a case for investing in Nigeria. But these decisions have thrown millions into poverty following the delay in implementing intervention programmes and lack of concrete plans to increase the dollar supply.
In the wake of fuel subsidy removal, Nigerians turned to gas as an alternative fuel as prices averaged N6,000 for 12.5kg of cooking gas. Oil marketers pledged N10 billion worth of investments to contribute Compressed Natural Gas (CNG)-powered public transit buses to mitigate the impact of the removal within 30 days in a meeting with Tinubu in June.
The president instructed the National Economic Council, led by Vice President Kashim Shettima, to devise a strategy and begin work on interventions to reduce the impact of subsidy removal on Nigerians but it would be three months after the removal of subsidies for Tinubu’s government to approve the establishment of the Presidential Compressed Natural Gas Initiative.
Read also: Nigeria’s petrol imports drop amid higher oil prices
The policy seeks to revolutionise the transportation landscape in the country, targeting over 11,500 new CNG-enabled vehicles and 55,000 CNG conversion kits for existing petrol-dependent vehicles, while simultaneously bolstering in-country manufacturing, local assembly and expansive job creation in line with the presidential directive.
Now the average price of cooking gas has almost shown the cost of inaction. According to Olatunbosun Oladapo, president of the Nigerian Association of Liquefied Petroleum Gas Marketers, the price of cooking gas has increased from around N9-N10 million per 20 metric tonnes to N14 million per 20 metric tonnes and could hit N18 million per metric tonne by December.
The impact of this is that the average price of 12.5kg of cooking gas could surge to N18,000 from the current price of N10,000. At this price point, this removes any pretence that the average consumer could see savings from converting their petrol generators to run on liquefied petroleum gas.
“Now, the ordinary man would not be able to buy gas. How many minimum wage earners can afford gas now? Everyone is turning to firewood and charcoal,” he said.
Following the rise in crude oil, diesel is inching close to N1,000 per litre, opening fresh pain for small and medium enterprises including hotels, hospitals, factories and schools whose costs of operations would spike, triggering a price increase in food, transport and services.
Read also: Soaring cooking gas prices may cost N18,000 by December
The Federal Government has forced a lid on the retail price of petrol, even as the landing cost has long crossed the pump price, leading to speculations that subsidy is back. If there were any doubts before, the Federation Account Allocation Committee report in August indicating that over N169 billion was used to pay subsidies reveals what the country is up against.
Many analysts have hailed the reforms embarked upon by President Tinubu. In June, the World Bank and the International Monetary Fund lauded what they termed as bold reforms.
“The recently undertaken PMS subsidy and FX reforms are historic, N3.9 trillion in savings in 2023 alone, stops Nigeria from going over a fiscal cliff and sets the stage for a new, upward investment, growth, and development trajectory,” Alex Sienaert, chief economist at World Bank Nigeria, said at the launch in Abuja of the Nigeria Development Update for June 2023.
A few months after these reforms, the market reality is that the positive effects are cooling. The stock market and Eurobonds, which got off to a blistering start, are tapering off.
FTSE Russell, a subsidiary of London Stock Exchange Group, this month reclassified Nigeria from Frontier to Unclassified Market Status due to an inability of international institutional investors to repatriate capital at a foreign exchange rate.
Following this news, Nigeria’s stock market plummeted. The central bank told investors it would clear the foreign exchange backlog estimated at N10 billion within two weeks but that also failed to materialise.
This has sent the naira reeling. The currency’s parallel-market rate is now about 29 percent weaker than the official exchange rate, where the naira closed Wednesday at 770.71 per dollar on the FMDQ OTC trading platform. The two rates, which briefly converged soon after Tinubu’s announcement of currency reforms in June, had diverged steadily since then as dollar supply from the central bank fell short.
For a country, where energy commodities are imported as a result of non-functional refineries, the prices of cooking gas, diesel and petrol are set to go through the roof on account of rising oil prices projected to hit $100 per barrel by year-end.
“I bought 12.5kg of cooking gas, few weeks ago, at N8,230” says Murad Faisaal, in a post on X (formerly Twitter), “to my utter disappointment, it increased to N10,300 on Monday, when I went to refill. Nigeria is not for the weak.”
To shore up revenues, the government in June introduced 7.5 percent value-added tax on diesel imports and industries are groaning.
Segun Kuti-George, national vice president of the Nigerian Association of Small-Scale Industrialists, said the high cost of diesel has posed a threat to his business.
“It is only those with essential products and services that may survive. A lot of businesses will go under now. And the irony is that whatever goes up in Nigeria never comes down,” he said.
