• Sunday, May 19, 2024
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BusinessDay

There’s no reason Nigeria should pay lower fuel prices than Saudi Arabia – Buhari

Why price of petrol would continue to be high

President Muhammadu Buhari has justified the present increase in the price petrol saying there is no justification on why Nigeria’s petrol price should be cheaper than Saudi Arabia and Egypt in his independence speech Thursday morning.

According to Buhari, the current economic challenges confronting the country necessitated the need to remove the wasteful petroleum subsidy.

“Egypt charges N211 per litre. Saudi Arabia charges N168 per litre. It makes no sense for oil to be cheaper in Nigeria than in Saudi Arabia,” Buhari said in his independence day address on October 1st.

Subsidy removal is a hot topic because it is politically unpopular to reduce them and force consumers to pay more. Yet the oil incomes have fallen by 40 percent making it difficult to sustain them.

Labour unions threatened to embark on a strike action which would have started on Monday but for engagement with government officials. The labour groups succeeded in having the government suspend electricity tariffs for the next two weeks.

Nigerians on social media are faulting the comparison with Saudi Arabia because the country’s minimum wage is much higher than Nigeria’s.

“President Buhari forgot to mention that the minimum wage in Egypt is higher than Nigeria’s. He also forgot to mention that minimum wage in Saudi Arabia is 10x Nigeria’s,” @akintomide tweeted.

While Saudi Arabia has no official minimum wage for the private sector, the public sector has a minimum rate of 3,000 Saudi riyals (N305,139).

The Egyptian president Abdel Fattah al-Sisi, last year raised the country’s minimum wage, from $70 (N26,600) to $116 (N44,080) last year on the back of growth in the economy after the country went through four years of economic reforms which includes floating the currency, deregulation and removal of subsidies and improving the ease of business.

The Buhari-led government has been reluctant to implement these kinds of reforms. The Central Bank continues to keep different exchange rates and spends large sums of money artificially propping up the naira.

Nigeria has shut its borders for over year shuttering smaller businesses and fueling unemployment and ill-will with its neighbours. Yet, the price of rice which largely accounted for the closure to improve self-sufficiency has gone up selling between N25,000 and N29,000, over 30 percent increase before border closure.

In the midst of a difficult time for most Nigerians, the Federal Government is still unable to cut down on wasteful spending. It is yet to cut down unnecessary government ministries and agencies, sell off an expansive presidential fleet, or reduce wasteful expenditure by the national assembly.

Most experts have also urged the Federal Government to reform the business environment including fixing its troubled ports, to attract the right investments which will grow the economy and improve the standard of living across the country.

Unlike other African countries, Nigeria with a population of about 200 million people imports more than 90percent of products like gasoline and diesel, swapping its prized export – crude- for petroleum products that people need in their everyday lives.

BusinessDay analysis revealed Petrol in Nigeria (NI60) costs less than half of what it costs in all of the country’s neighbouring countries. For instance, petrol is sold in Ghana for N332, Benin for N359, Togo for N300, and Niger for N346.

Also, Chad currently sells petrol for N366, Cameroon for N449, Burkina Faso for N433, Mali for N476, Liberia for N267, Serria Lone for N281, Guinea for N363 and Senegal for N549.

Nigeria sells the petrol cheaper than only eight other countries in the world – iran, Venezuela, Malaysia, Angola, Sudan, Qatar, Algeria and Kuwait, but all these countries also refine their own petrol apart from Nigeria.

Angola refines the least among the countries but Nigeria imports virtually all its petrol, in a swap deal where it exchanges crude for refined petrol. But it still pays for shipping and when administrative charges are tacked on, the landing cost of petrol increases.

But unless Nigerians see an improvement in their living standards, the argument to remove subsidies by the Nigerian government on the basis of the fact that other countries are doing so will be a hard one to sell.