How Nigeria’s govt. fuel price hike tightens noose on business, household incomes

The recent increase in the ex-depot price of petrol to N138.60 by the Petroleum Products Marketing Company (PPMC), appears to have dealt Nigerian households a deadly blow with majority of the citizenry worried the policy could further impoverish them.
This concern comes as the World Bank in its recent ease of doing business rating listed the country as one of the worst places to conduct business, with the nation’s agriculture sub-sector lamenting that high cost of transportation remained a major factor in the astronomical rise in the cost of food items.
Already some economic analysts have urged Nigerians to brace up for tougher times ahead as the latest hike which brings the cost of petrol to N150 per litre, is set to further drain their already stretched disposable income amid the COVID-19 pandemic still ravaging the global economy.
For most part, there is growing anxiety that high cost of food items and transportation across the country would soon spike with the latest fuel price increase.
On March 19, 2020, when the Federal Government announced a price modulation mechanism to be managed by the Petroleum Products Pricing Regulatory Agency (PPPRA) it had promised that henceforth retail prices would be adjusted based on prevailing global crude oil market price.
The first adjustment under the monthly policy which took effect in March terminated by end of April. That announcement reduced the price of petrol from N145 to N123.50 and N125 per litre respectively.
In May and June, the PPPRA announced the same retail price band of petrol to N121.50 and N123.50 per litre.
But by July, the PPPRA increased the price of petrol to a band of N140.80 to N143.80 per litre. Curiously, the PPPRA failed to announce a price review for August but left the responsibility in the hands of PPMC which announced an increase in the ex-depot price of petrol from prior to the latest increase, depot owners sold the product for between N133.50 per litre to N138.62 per litre, leaving no room for a lower and upper limits. This, has however led to multiple fuel rates by marketers, contrary to the earlier position taken by the Minister of State for Petroleum Resources, who vowed never to allow marketers determine petrol price in order to shield consumers from exploitation.
However, as at last week, filling stations had already adopted multiple fuel prices ranging from N150 per litre, the highest band to N148.80 and N149 respectively, depending on their locations. This means that in the midst of the harsh economic environment posed by the coronavirus pandemic, Nigerians would be paying more for virtually everything as transportation cost remains a key inflation driver in the country.
Commenting on the likely consequence of the current fuel price hike, acting Director General of Manufacturers Association of Nigeria (MAN), Mr Ambrose Oruche, said full deregulation of the petroleum industry is the solution to Nigeria’s petrol industry problems.
Oruche said fuel price increase was expected because the petroleum industry is now fully deregulated, and that Nigerians should expect price to keep fluctuating in line the trends.
The hike in fuel price according to MAN boss is a sign that the petroleum industry has been deregulated, adding that fixing of price was no longer in government’s hands but determined by market forces. “What government is trying to do is to control market forces so as not to take cost beyond the ordinary Nigerians. The price increase will continue but moderate when there is a refinery where the products can be refined locally,” he said.
He however urged government to sign the Petroleum Industry Bill (PIB) to facilitate more investments could come into refineries and to reduce the cost of imported on consumers.
For big businesses that use diesel to power electricity, the hike in fuel price would have no significant impact on them having been used purchasing AGO at a deregulated prices.
“So small businesses will be impacted negatively by the increment,” he stressed.
To reduce the impact on businesses, the MAN boss appealed to government to improve power generation and distribution to enable consumers get at least 20hours power supply daily to reduce dependence on PMS to power generators.
He also stressed the need for government to compensate small businesses that would be affected through tax rebate or grants to help them to remain competitive in business.
For his part, Chairman of National Union of Road Transport Workers, Osogbo Unit, Alhaji Rafiu Isa, said increasing pump price at this trying time will make the masses poorer. “Our economy is not stable, therefore raising fuel prices at this moment does not speak well of the government. It is the masses that bear the brunt of these policies. Though, we understand that we solely depend on oil for income, government should help Nigerian masses by reducing the present pains being inflicted on poor masses,’’ he said.

OPS wants PPPRA to hands off fuel pricing

Meanwhile Nigeria’s Organised Labour and the Organised Private Sector have condemned the latest increase in the pump price of Premium Motor Spirit (PMS) by the Federal Government the second within a space of two months warning it could lead to further social unrest, loss of productive time at the fuel stations and closure of businesses due to low sales.

The Nigerian Labour Congress (NLC) expressed shock at the first increase which came barely two months after reduction in price due to the crash in the international price of crude and to cushion the effect of the national lockdown following the outbreak of the COVID-19 pandemic.

The NLC President Ayuba Wabba had last June condemned the arbitrariness of the Petroleum Product Pricing Regulatory Agency (PPPRA) and demanded immediate reversal . But that was never implemented before another increase was announced last week.

Last week , the Organised Labour vowed that the new increase in the price of Petroleum product will be resisted, describing Federal Government’s latest attempt as insensitive and deceptive.

The Vice President of Public Service International (PSI) for Africa and Arab Region and Vice President of the Nigeria Labour Congress (NLC), Peters Adeyemi , said it was part of the insensitivity of government to the plights of Nigerian workers and entire citizens.

He said the Organised Labour, members of the Civil Society Organisations as well as well meaning Nigerians should rise up to condemn the increase and pain being inflicted on Nigerians at this critical period.

“It is sad and unacceptable at this period when Nigerians are going through the COVID-19 pandemic where government has been unable to provide palliatives to citizens.
“This cannot be accepted. I think every well meaning Nigerian should condemn it.”
Adeyemi lamented that it was a deceptive strategy of the present government, which had earlier reduced the price of the product. But few months later increased the price and now making another attempt to further jerk it up.
He stated that Nigerians must rise in unison to condemn and resist it, noting that failure to do so would give the government a leeway to continue increasing prices of the product.
“We cannot accept it, it will erode all the progress and achievement labour had made to put an end to the arbitrary increases in prices of petroleum products over the years,” he said.
The labour leader said it would further exacerbate the plights of the workers, moreso when the exchange of Naira to a dollar has further deteriorated during the pandemic.
He stated: “It means that what is paid to Nigerian workers does not have value any longer. The prices of foods and other essentials have gone up, and when things go up, in Nigeria they don’t come down.
“Government says it is no longer going to subsidise the product whereas the looting of the nation’s commonwealth has continued. Is it not better to use those money to subsidise the products for poor Nigerians rather than further impoverishing them?”
He added that the increase in the number of taxes Nigerians are now been subjected to is another indication that the government is not representing the interest of the poor, stressing it is highly unacceptable to Nigerian workers.
Also reacting, the Vice President of the IndustriAll Global and former General Secretary of the National Union of Textile Garment and Tailoring Workers of Nigeria (NUTGTWN), Issa Aremu, said the increase in product price shows that this administration has not digested the lessons of COVID-19 pandemic.
According to Aremu, government failed to realise that for sustainability, Nigerians need solidarity economy through lower prices to stimulate demand after lockdown and not high price of fuel which would affect other prices.
He noted that the new normal, means Nigeria should not return to old fuel pricing arrangements that often reward importers but punishes consumers.
He said, “Deregulated prices without local refineries would worsen poverty and unemployment through high production costs and collapse of disposable income.
“This is a challenge to the new united NLC to move in defence of working people. The coronavirus pandemic together with fuel price pandemic amount to bad governance which labour must resist now!”
In his reaction, the NLC President Ayuba Wabba, said labour is demanding that the four national petroleum refineries be fixed without any further delay to put an end to the importation of the product.
He equally said Nigerian workers want to be appraised of the timeline set by the government to ensure that this is effectively done.
In a similar vein, President of the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), Williams Akporeha, also expressed that the only solution to the reckless increase in the prices of petroleum products is for the local refineries to work.
“We are the one that operate in the sector and we have always been advocating that the solution is that our local refineries should work and those giving local licenses should start operation,” he said.
Akporeha noted that as long as Nigeria continue to import, the situation would continue to degenerate as price modulation will always be subjected to international cost and circumstances.
“Those that have collected licences to operate refineries should come out to invest in the sector rather than hiding the licences in their homes as if they are treasures,” he insisted.
The NUPENG President also tasked Nigerians to take their destiny in their hands and rise against the new increase, stating that government would rather see their indifference as acceptance.

OPS views
However, the Organised Private Sector (OPS) argued that government’s
seemingly indecisive policy statement on deregulation has fueled uncertainties that could be exploited to frustrate its total deregulation agenda.
The Nigeria Employers Consultative Association (NECA) for instance said though it believes in total deregulation of the downstream oil sector, it should not necessarily lead to long queue in the fuel station.
The Director General of NECA, Timothy Olawale,, queried the timing which he said citizens and businesses are still reeling from the negative effect of the COVID-19 pandemic.
He said, “The consequential effect of this will permeate every facet of life since PMS is used by both individuals and businesses. The quality of life of the citizenry will further reduce while businesses will be under pressure to pass costs on to customers whose purchasing power is already low.
“This will lead to further social unrest, loss of productive time at the fuel stations and closure of businesses due to low sales.
“We call on government to, as a matter of urgency to clear the air and release a structured and foolproof policy that will lead to the total deregulation of the downstream oil sector.”
He maintained that structural reforms of the petroleum sector has become a necessity as the sector is faced with several challenges such as, large scale smuggling of petroleum products, pipelines vandalism, low capacity utilisation and refining activities in the local refineries, scarcity of petroleum products, mismanagement of revenue from petroleum, and high level of corruption in the state-owned petroleum parastatals vis-à-vis political office holders.
Similarly, the Lagos Chamber of Commerce and Industry (LCCI) tasked the Petroleum Product Pricing Regulatory Agency (PPPRA) to hands off fixing or determining what the price of the petroleum should be in the country.
The LCCI Director General, Muda Yusuf however said that the development is a reflection of what to expect in a deregulated market regime in the Petroleum downstream sector.
He noted that given the state of the economy and the condition of the Petroleum downstream sector, the deregulation option is perhaps the best option, advising that the new policy regime should be allowed to function freely.