An albatross in the current fuel price hike

By Sunny Nwachukwu

Unless the federal government aggressively pursues the way out of the present problem of meeting daily demands of domestic consumption of white fuel, the so called deregulated policy by the PPPRA and free access given to petroleum products/oil marketers for importation of refined petroleum products, will not solve the fears and problems of lengthy queues at gas stations, or fuel scarcity in the country because, the already high pump price will continue to go up since it is determined at the international oil market, whereas the present pricing of refined products is not the true reflection of its stock of raw crude sold  during the total global lockdown at a record low figure of about $20/barrel at the international oil market. Now that crude has started to pick around $40/barrel especially with tumbling local currency exchange rate of about N470/$, PPPRA will keep adjusting the price upwards, all in the name of total deregulation. This posture being towed by the authority does not make any business sense at all.

The anticipated low pump price envisaged, from open market-forces through competitive pricing template on imported products among dealers is far from being realizable presently but, can only be meaningfully achieved if there was in existence at least one local source or provider of the refined products. That could be based on an attractive advantage of cutting local cost of production from lifting the raw material/crude with our terribly devalued local currency, and an added rebate if provided by the government, to be enjoyed as an incentive given to local investors. When such is compared to the oil pricing at the international market, healthy competitiveness on fuel pump price shall suffice.

This measure too, can only be feasible if the downstream is working in its true meaning within the economy; where the four existing facilities are supposed to have been rehabilitated and be producing at reasonable capacity, plus the added operations from the privately established refineries likeDangote’sLekki 650,000 bpd crude throughput, if it comes on stream; but, is yet to be completed.

Rather, this poorly anticipated thought by the government, as an envisaged strategy will never work because, there was no back up prior arrangements as a plan “B” should there be any eventuality! This is why I kept hammering on local refining. Now, the chickens have come home to roost! The problem is here live in the society! As it stands, no other feasible solution, unless the government quickly and sincerely run extra investment in the downstream to up the daily output capacities of the underperforming existing facilities, and in addition, desperately put in place the three proposed greenfield plants with a firmed plan to instantly and outrightly resell all of them to private oil merchants and investors who must be citizens, and at the same time, urge Dangote and other private plants to start refining.

Without this, it will exacerbate the pains more for the masses and the vulnerable artisans that solely depend on its daily usage for their economic and commercial tasks through which they eke a living, in putting food on the table for their families. This ill-timed strategy at COVID-19 pandemic era is albatross!  I sincerely cannot see any sign for improvement from this move made by the FG, with the current pump price of PMS @N162/liter.

This current pricing policy might spell doom for the economy because, apart from people’s agitation, protests and resistance to the rising prices, inflation rate for goods and services, it shall create in the present situation of our already battered and devalued local currency to an abysmal low rate, shall kick start another unimaginable confusion and economic turmoil that could endanger the security situation and disrupt its apparatus in the society, especially at this crime-laden dreaded season of “ember months” or Christmas period.

Nigeria can only be reset alright if official corruption is judiciously tackled and sincerely corrected in the Nigeria’s oil & gas sector of the economy; judging from its strategic importance to Nigeria’s existence and survival at the post COVID-19 pandemic era. Crude business plays a vital role for this economy, no doubt. The recently scrapped fuel subsidy dealt a terrible blow to our fragile economy while it was in force. We need not sulk now but to first improve the present economic situation through standard, sustainable and stable policy, with a well spelt out and clearly defined approach to solving the problem in the economy.