Ayo Teriba, chief executive officer at Economic Associates has said President Bola Tinubu should unbundle the Nigerian National Petroleum Company Limited (NNPCL) and the Central Bank of Nigeria (CBN) to achieve price stability in the country.
This was revealed at the 2023 mid-year economic review and outlook event by the Lagos Chamber of Commerce and Industry (LCCI) on Wednesday.
The annual event is designed to review key policy developments and macroeconomic performance in the first half of the year, discuss the outlook and expectations for the second half of the year focusing on risks and opportunities.
Speaking at the event, Teriba said, “For a successful reform of the downstream sector, you need to break monopoly parts and ensure that prices are cost-reflective so that suppliers can easily enter to compete with the government, which is the only way to liberalise price, making it come down.”
“It was the competition that helped consumers to benefit from the reforms in the telecommunication sector. And I do not see that competition happening in the downstream of the petroleum sector where you have the NNPCL being a virtual monopolist,” he said.
He added that it is important to call on the president to do something about breaking the monopoly power of the NNPCL.
“My suggestion is that you should unbundle NNPCL to separate the upstream exploration and production operations from the mid-stream refinery operations and also separate the downstream operations. Put them under the oversight of functionary separate entities,” he said.
According to the popular economist, adjusting prices without institutional reforms will not go far in the country, and the same situation applies to the unification of the exchange rate.
“If you want the country to benefit from the reform of the foreign exchange market, you will need to do institutional reforms that will ensure transparency and competition,” he said.
Teriba added that one of the problems with the CBN and its operations in the FX market since 2015 was the tendency to favour banks over other players in the market.
Since May 29, when President Bola Tinubu announced the removal of the petrol subsidy, petrol prices have tripled to N617 per litre, while the value of the naira has plunged following the floating of the currency.
The floating of the naira has increased the official exchange rate from N463.38/$ to N774.77/$ as at Tuesday while the parallel market rate stood at N910/$.
The two policies have pushed up the country’s inflation rate to its highest in nearly 18 years of 24.08 percent in July 2023 from 22.79 percent in June, according to the National Bureau of Statistics.
“The policies’ pronouncements were embarked on without any rigorous diagnosis of the economy. No preparations or engagements were made to deal with the fallouts from the policies,” Teriba said.
He said the citizens are in pain and that we should have spent some time debating on how best to carry out reforms and identify in particular the fallouts from reforms.
“The need for reforms is to have benefits in the country. There will be gainers and losers. But you can identify the gainers and losers and measure the extent of likely losses and also make provisions upfront for mitigating losses,” he added.
Chinwe Egwim, chief economist at Coronation Merchant Bank, projected the country’s inflation rate to hit as high as 27.6 percent in the second half of the year.
“The effects of the petrol subsidy removal and FX liberalisation may result in the minimal positive impact that could come in these harvest months. The translation effect of cost-push inflation which is visible in domestic prices is still weighing heavily on businesses expenses as well as household wallets,” she said.
On her part, Chinyere Almona, the director-general of LCCI, urged the Federal Government to step up efforts to tackle rising food costs, especially staple food items.