• Wednesday, May 29, 2024
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Economy: Buhari explains why petroleum prices must be adjusted

Buhari to present 2021 budget to National Assembly Thursday

Nigeria’s President Muhammadu Buhari on Thursday said the country must further adjust petroleum prices in the wake of current global realities.

The president, in his early morning national broadcast to mark Nigeria’s 60th Independence anniversary, said the country’s revenue had experienced a 60 percent decline in the wake of current global coronavirus pandemic resulting in insufficient funds to meet budgetary needs.

“In addition to public health challenges of working to contain the spread of the coronavirus, we have suffered a significant drop in our foreign exchange earnings and internal revenues due to 40 percent drop in oil prices and steep drop in economic activities, leading to a 60 percent drop in government revenue,” Buhari said.

“In this regard, sustaining the level of petroleum prices is no longer possible,” he said.

The president noted that government was grappling with the dual challenge of saving lives and livelihoods in face of drastically reduced resources, adding that his government must face realities in the current circumstance.

“The government, since coming into office has recognised the economic argument for adjusting the price of petroleum. But the social argument about the knock-on effect of any adjustment weighed heavily with the government,” he said.

Buhari, who gave a comparative analysis of petroleum prices among oil producing countries, noted that while in Nigeria the premium motor spirit (PMS – petrol) sells at N161 per litre, it sells higher in comparable countries.

“Chad, which is an oil producing country, charges N362 per litre. Niger, also an oil producing country, sells 1 litre at N346. In Ghana, another oil producing country, petroleum pump price is N326 per litre. Further afield, 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,” he said.

He noted that “to achieve the great country we desire, we need to solidify our strength, increase our commitment and encourage ourselves to do that which is right and proper even when no one is watching”.

President Buhari listed several efforts made by his administration in the last three years, in support of the economy and to the weakest members of the society.

They include the Tradermoni, Farmermoni, the School Feeding Programme, job creation efforts and agricultural intervention programmes.

“No government in the past did what we are doing with such scarce resources. We have managed to keep things going in spite of the disproportionate spending on security,” the president said.

He berated “those in the previous governments from 1999 – 2015 who presided over the near destruction of the country” for having “the impudence to attempt to criticise our efforts”.
He declared that in the current circumstances, “a responsible government must face realities”.

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

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 include 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 a year shuttering smaller businesses and fuelling 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 that 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 90 percent of products like gasoline and diesel, swapping its prized export – crude- for petroleum products that people need in their everyday lives.

BusinessDay analysis reveals that 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 Leone 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 in, 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.