Gasoline price dilemma persists as FG maintains subsidies
In fact, tomorrow the federal government and the organized workforce will meet again to study reports from bilateral technical committees on fuel prices and electricity tariffs.
The committee has developed a transparent methodology and model that will guide the determination of realistic prices for the PMS pump and will compare all elements of the model’s pricing with neighboring countries.
More than 80% of the federal government’s revenue comes from oil. Higher prices help the government deal with growing budget deficits, but create problems for a population heavily dependent on imported fuels. When oil prices surged above the $ 60 mark due to production cuts by OPEC + countries and a production freeze in Texas, cartels could renegotiate their cutbacks, leading to lower prices.
Uncertainty has left the federal government in a dilemma over the elimination of fuel subsidies amid public outcry over rising inflation.
Despite claims to the contrary, the federal government’s stance on removing subsidies and strengthening price controls in the downstream sector poses more challenges for marketers dealing with investment uncertainty and for the government in managing social welfare and expectations.
Maintaining a monopoly on imports of petroleum products, the federal government, through the Nigeria National Petroleum Corporation (NNPC), determines how much it sells products to other marketers, raising concerns about how the margin price is regulated.
For marketers, the rise in world crude oil prices should naturally be reflected in retail prices for petroleum products, while government control and monopoly on imports should be liberalized for other participants. However, there are concerns as in the few cases where oil prices fall, marketers are hesitant about adjusting pump prices.
Amid uncertainty, The Guardian learned that the government, fearing a backlash from unions, could bear the burden of weekly subsidies of 11.20 billion articles, despite the high cost of oil production.
Marketers from all states have already initiated an upward price adjustment for the pump, although the NNPC insisted that the pump price would not change in February.
This comes at a time when Nigeria is putting up its national assets for sale, planning a large loan to finance its 2021 budget.
SOME gas stations in Abuja, Lagos, Benin, Asaba and other cities in the country have already sold the product for up to 175 ny. E. Per liter, although the last official price was set at 162 n. E.
Benin City motorists said they bought these products for £ 170 a liter at most gas stations. There are also price differences in and around Lagos, where gas stations sell from N162 to N170 per liter.
In Asaba and other cities in Delta State, motorists pay between 170 and 175 N per liter. A commercial motorist, who identified himself as John Obige, said he could have resorted to increasing transportation costs as the pump price increase was already affecting his daily income.
The Department of Petroleum Resources (DPR) previously issued a warning to warehouse owners, saying that some operators could disrupt the situation by piling up food in parts of the country.
Similarly, there are signs that some marketers may be closing their stations in the coming days. Some have already done this in parts of Lagos.
Dr Billy Gillis-Harry, President of the Petroleum Retail Owners Association of Nigeria (PETROAN), told the Guardian that if urgent action is not taken, marketers will resort to self-help.
With the rise in crude oil prices on the international market, the cost of landing gasoline when imported into the interbank exchange in the amount of 379.5 n. E. Forecasted at 180 AD. E. Per liter.
The additional margin allowed by the Petroleum Pricing Regulatory Agency (PPPRA) is projected to be around N19 for exponential price increases. Wholesalers (deposit holders) can charge a margin of N4, retailers charge around N6, and the Oil Equalization Fund charge around N9 per liter.
While other countries produce a barrel of crude for about $ 9, Nigeria’s production cost is $ 30. The current administration’s efforts to cut costs remain a mirage, although such cuts are possible if industry stakeholders participate in the recently unveiled Nigerian Oil Cost Optimization Program. (NUCOP).
Struggling to fund its more than $ 13 trillion budget for 2021, Nigeria chose to deregulate the downstream sector last year but was unable to let market forces dictate pump prices. The market remained a monopoly, with only the state-owned oil company NNPC, which has access to foreign exchange and exchanges the country’s crude oil for refineries abroad, assumed control of the market.
Although the price of gasoline was immediately reduced, the government deregulated the market after the fall in the price of crude oil on the international market, the price rose from 121.50 to 123.50 per liter in June; N140.80 to N143.80 in July and from N148 to N150 in August. In September, pump prices increased further to N158 and N162 per liter.
When an attempt was made to raise him last December, the unions asked for Silva’s boss. They were furious at the repeated increases in gasoline prices. The Nigeria Workers’ Congress (NLC) and the Trade Union Congress (TUC) dragged the federal government into dialogue, during which the NNPC agreed to cut the original N167.44 per liter of N5.
Silva, however, said that he does not foresee any subsidies in the 2021 budget and the inability of the NNPC to continue to bear the costs associated with insufficient recovery. “The NNPC should also think about optimizing the cost of the product because, as we all know, prices for crude oil where it is today ($ 60). “
Abubakar Shettima, vice president of the Independent Petroleum Marketers Association of Nigeria (IPMAN), told the Guardian that the previous warehouse price, which was officially 143 AD, was in the past. per liter, has moved to about 158 AD. per liter, which made the sale of gasoline impossible. at the current price of the pump N162 per liter.
Dr Diran Favibe, petroleum economist and chief executive officer of International Energy Services Limited, noted that the rise in crude oil prices would benefit OPEC countries, including Nigeria, but noted that these profits were down due to the prevailing situation in Nigeria. in particular the lack of local refineries and the prevailing high cost of production.
“Since the price is now almost double the budget target, there will be more of them, and this is a positive moment. This will help us meet the 2021 budget. ”
According to him, such a development of events may also prevent the government from selling national assets to finance the budget.
Energy expert from FOSTER Michael Faniran noted that since the crude oil economy is dependent on exports, the rise in crude oil prices will be good news for the country, especially if the current price remains the same.
Noting that while development needs to be very healthy in order to close the projected deficit, in projections of budget revenues for 2021, Nigeria remains in a mixed mood because this increase would mean higher prices for imported gasoline.
“This will lead to an increase in prices for petroleum products or a return to the subsidy regime. Thus, the payment of grants will nullify all the revenues that we could receive in the revenue side of the budget, ”he said.
Habib Jayela, Deputy Director of PricewaterhouseCoopers, Energy, Utilities and Resources, noted that optimism should emerge with the availability of vaccines against COVID-19 in various countries, leading to an increase in demand for crude oil.
Source: – Guardian