The Nigerian government has once again demonstrated policy inconsistency which has been the bane of previous administrations. This has also become its trade in stock going by the recent development concerning the price of fuel as demonstrated by the recent pronouncement of Chris Ngige, the minister of Labour and Productivity.
The government succumbed to pressure from the Nigerian Labour Congress even when it knows the implication of fuel subsidy to the Nigerian economy. There is no local factor that determines the price of refined product in the country as the 450,000 capacities refineries owned by the government are all technical dead. The price of petrol is determined by the price of crude oil at the international markets and so removing N5 from the pump price of petrol just shows this government is never serious in respect of its professed deregulation which it has mouthed several time. It can justify it economically.
NNPC group managing director, Mele Kyari, in early April 2020, took advantage of the low demand for crude oil globally which also brought the price of refined products to the lowest ebb and declared that the downstream subsector of the oil and gas industry has been deregulated.
The Minister of State for Petroleum Resources, Timipre Sylva, had in September 2020, stated that the Federal Government had stepped back from fixing the price of petrol and that prices will be determined by market forces and crude oil prices.
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The action of the labour minister indicates that the government ministers are not on the same page on this issue of deregulation of the downstream and this very dangerous for the Nigerian economy.
Marketers were astonished at the price reduction especially when most of them have stocked up products at higher costs before the new price was announced last week, to ensure that there would be product availability during the Christmas, New Year period and beyond.
The situation is now raising a lot of concerns among the stakeholders as some of them are worried over the inability of the government to allow for the interplay of forces of demand and supply in determining the pump price of Premium Motor Spirit or petrol .
A Financial expert, Anderson Julius, was of the view that the approach of negotiating petrol pump prices between Government and labour without the involvement of investors further diminishes investor confidence, setting an unprofessional precedent that will be difficult to set aside when parameters that constitute the pump price of PMS rise again
Meanwhile some of the stakeholders including oil marketers and depot owners have demanded access to foreign exchange from the Central Bank of Nigeria (CBN), noting that the dearth of access to the forex is hindering the effectiveness of deregulation.
The Chairman of Major Oil Marketers Association of Nigeria (MOMAN), Adetunji Oyebanji reiterated that “Nothing has changed. The Forex issue is still like that. And as you can see, the government has also extended that DSDP ( the exchange of crude for refined petroleum products) arrangement. That’s a signal to you that foreign exchange may not be there for us to access.”
Many marketers believe that the deregulation process should do away with the country operating the DSDP system where crude is swapped for petroleum products through the NNPC and PPMC, rather they should put in place a system that allows the country sell its crude to raise the needed FOREX and allow operators access some of these foreign exchange through the CBN FOREX window to source products at the best possible prices, thereby allowing the forces of demand and supply dictate the economics of the sector for a more efficient deregulated market.
