Small businesses, households begin adjusting to new fuel price

With the new pump price of  fuel set at N145, small businesses (SMEs) and households are beginning to adjust in the face of shrinking incomes and revenues. BusinessDay findings across the country show that middle and low income households are beginning to embark on costcutting measures as they prepare to wade through the temporary impact of the deregulation.
Small businesses, whose energy spend forms between 30 and 40 percent of the entire expenditure before now, are hopeful the deregulation would make more fuel available for enterprises, despite raising petrol price temporarily.
According to Frank Jacobs, president, Manufacturers Association of Nigeria (MAN), small-scale manufacturers are already used to the price, as many of them have always bought fuel at above N145.
“Apart from Lagos and Abuja, many of them buy fuel at above that price. We manufacturers used to buy diesel at N170 and N180 per litre, but today, we buy it at N120, thanks to deregulation,” Jacobs said, adding that this should be extended to other sectors as it is the only way to go.
Ike Ibeabuchi, managing director of a small-scale chemical firm in Enugu State, said small-scale businesses are already getting used to buying fuel at above N145 and might not have much difficulty doing so now.
The Rivers Entrepreneurs and Investors Forum (REIF) led by an engineer, Ibifiri Bobmanuel, supported the removal but frowned at the attempt by the Federal Government to peg the price. “You cannot deregulate and regulate at the same time,” he said.
Bobmanuel told BusinessDay that the government should hands off totally and only create conditions for local refineries to spring up, saying the N145 per litre pegging would also fail because of the dollar being sourced from the black market at about N330 to import fuel.
However, Greatsheyi Akintunde, chairman of the Nigerian Association of Small Scale Industries (NASSI), Ondo State chapter, said with the hike in price necessitated by deregulation, high production cost could hit several small-scale industries.
Meanwhile Ibe Kachikwu, minister of state for petroleum, said yesterday that no marketer (fuel station) has been told the amount to sell its product, adding that the Nigerian National Petroleum Corporation (NNPC) would be hoping to sell fuel at N135per litre.
“As we go into the hinterlands, NNPC stations will be hoping to head towards more of N135 than the N145 band. How did we come to the price of N145? It’s a simple conversion of using foreign exchange at N285. That N285 is from nowhere; it is basically the secondary source that people buy FX from, versus the N320 which is black market.
“If you convert it and throw it in, you will get about N141, N142 or N143. So there isn’t much of palliative elements left there for you to use. It is simply, ‘go out, find your product, your cost is covered, there is an opportunity for your efficiency to make money, come and deliver.
However, the queues lengthened yesterday in Abuja, as abandoned filling stations in satellite towns of the Federal Capital Territory that were closed down for some time, have resumed dispensing the product at the rate of N200 per litre.
Some of the major filling stations in the FCT, particularly ConOil directly opposite the NNPC Towers, were congested by motorists, requiring the intervention of armed policemen, who sealed off a whole driveway and diverted traffic to other roads, to control the crowd.
The situation remained the same along Airport Road and around the Lugbe area of the FCT, as the MRS filling station overlooking Airport Road was filled with vehicles to the brim and lined with a trail of parked vehicles with a long length that disappeared into the horizon.
The cost of transportation also rose astronomically, as commuters said they experienced about 100 percent price hike.
Some civil servants also threatened to go on strike if the Federal Government refuses to increase the minimum wage.
In spite of this, the majority of the Organised Private Sector are backing this move.
Bassey Edem, national president, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), hailed the FG’s deregulation of the downstream sector, but added that government should have allowed the market to determine the price.
The president of the Port Harcourt Chamber of Commerce (PHCCIMA), a medical doctor, Emi Membre-Otaji, said deregulation was the way to go but added that there should have been a policy plan to make local refining a priority. “There is a sour side to that decision and it has to do with timing. I also think Mr. President should have gradually unleashed it step by step, considering that Nigeria’s economy is almost shutting down, and on the brink of recession while the crunchy effect is biting on the populace.”
Emilia Ekama Akpan, national vice president of the Manufacturers Association of Nigeria (MAN) for the south-south and east, said it was a good policy that would pay off in the long run but feared that the common man would suffer in the short run. She advised the Federal Government not to allow negative reactions to grow into mass dissent.
Muda Yusuf, director general, Lagos Chamber of Commerce and Industry (LCCI), said the move would free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, education sector, adding that it would eliminate product scarcity and create jbs.
Olufemi Olawore, secretary-general, Major Oil Marketers Association of Nigeria (MOMAN), told BusinessDay that every step towards deregulation of the downstream sector of the economy should be supported, saying that “We believe it is the right way to go but the government should also begin to engage.”
But Toyin Taiwo, President, Ogun State Chamber of Commerce, Industries, Mines and Agriculture (OGUNCCIMA), said that the time was not right, going by the extremely harsh economic conditions which the country is facing at this time in terms of foreign exchange scarcity, high cost of living, among others, noting however, that there should be some well-defined palliatives to cushion the negative effects of hardship.
In Kano, while most of the consumers of the commodity welcomed the resolve of government to increase the price, some sections of the consumers are opposed to it.
Abdullahi Alwusa, an entrepreneur, said the increment would go a long way in ending the persistent scarcity of the commodity in the state.
Balarabe Musa, former governor of Kaduna State, urged the Federal Government to reverse the N145 new petrol pump price introduced on Wednesday to avoid inflicting more pains on Nigerians.
“We are in trouble. The already bad situation will get worse and it will worsen the poverty level of Nigerians,“ he said. The Trade Union Congress (TUC) in Rivers State led by Chika Onuegbu said in a statement that it rejected the introduction of deregulations without any appropriate legal framework. He chided the government for fixing an outrageous cut-throat prices for petroleum products at a time when Nigerian were passing through excruciating economic hardship.