Wrong Time For Another Fuel Price Increase

Buhari

  Nigeria’s economy is in dire strait. The economy is in a recession. The economy has been hard hit by the coronavirus pandemic. It has been estimated that over 40 per cent of the workforce in the formal and informal private have been laid off or are on redundancy as a result of the impact of the coronavirus pandemic. There is no sector of the economy that had not been impacted negatively one way or the other by the coronavirus pandemic. Many Nigerians are hungry, angry, disillusioned and upset as a result of the state of the country’s economy. 

The situation is not helped by the suffocating insecurity across the country which has hindered farming activities including the harvesting of crops and distribution of goods and services due to the fear of herdsmen, bandits, armed robbers and other criminal elements on rampage on our roads, farms and even our homes. It is in the midst of all these uncertain and unfavourable economic climate that the news emerged that the country is about to witness another round of fuel price increase. And the reasons are the usual excuse for taking money out of the pocket of poor suffering masses of this country in the name of fuel price increase. And it has pitched the people against the government which claimed it has no hand in it, as the price is dictated by the forces of demand and supply and in this case the price of fuel in the international market. 

But how can the government not have a hand in the expected price hike when its own company, Nigerian National Petroleum Corporation (NNPC) is the sole importer of fuel in the country. And the fight for who is right or wrong between labour on one hand and marketers and federal government on the other hand has just begun. Organised labour and oil marketers according to media reports have expressed divergent views on moves to increase the pump price of fuel following the rise of crude oil price to above $60 per barrel in the international market. 

While labour warned against the increase, the Independent Petroleum Marketers Association of Nigeria (IPMAN) said with dwindling margin returns to marketers, a price increase is inevitable. The Minister of State for Petroleum Resources, Timipre Sylva, had at the official launch of the Nigerian Upstream Cost Optimisation Programme, urged Nigerians to be ready to bear the pains of the proposed hike. The minister said with no provision of subsidy in the 2021 budget, Nigerian National Petroleum Corporation (NNPC) cannot continue to bear the cost of under-recovery. 

Reacting to the minister’s position, president of the Trade Union Congress (TUC), Comrade Quadri Olaleye, expressed disappointment with the way and manner the government was handling issues relating to increment of fuel anytime there is a little rise in the international market. The TUC helmsman said he is surprised that the government never for once deemed it fit to bring down the price of petrol when there was a fall in the price of crude oil in the international market. The issue of the appropriateness of NNPC monopoly in fuel import or otherwise should be a topic for another day, here one is more concerned about the impact of fuel price hike at this time when government is supposed to reflect the economy by putting money in the system and not taking away the little in people’s pockets through fuel increase with its negative multiplier effect on the economy and on ordinary Nigerians. Everybody appreciates the fact that when motorists pay more for fuel, the transport fare increases. This has been the case even when the increase is only marginal. In the particular case where the cost of fuel is expected to double, the increase in transport fare will be astronomical. This will in turn affect everything else – school fees, house rent, just name it. The increase in the fuel price is likely to lead to a rise in inflation. 

It is important to use data generated by the Nigerian government agency to buttress why it is worrisome to generate another high inflation rate through fuel price increase by this time. Nigeria's inflation rate hit 15.75% in December 2020, highest in 3 years. Nigeria's inflation rate increased by 15.75% (year-on-year) in December 2020, the highest rate recorded in 3 years.

According to the latest Consumer Price Index report, released by the National Bureau of Statistics (NBS), the latest figure is 0.86% points higher than the rate of 14.89% recorded in November 2020. On a month-on-month basis, the index increased by 1.61% in December 2020. This is 0.01% point higher than the rate recorded in November 2020 (1.60%). The food inflation rose sharply by 19.56% in December compared to 18.3% recorded in the previous month. On a month-on-month basis, the food sub-index increased by 2.05% in December 2020, up by 0.01% point from 2.04% recorded in November 2020. 

According to the NBC the rise in the food index was caused by increases recorded in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetable, fish and oils and fats. The Core inflation, which excludes the prices of volatile agricultural produce stood at 11.37% in December 2020, up by 0.32% when compared with 11.05% recorded in November 2020. Also, on a month-on-month basis, the core sub-index increased by 1.10% in December 2020. This was up by 0.39% when compared with 0.71% recorded in November 2020. The highest increases were recorded in prices of passenger transport by air, medical services, hospital services, shoes and other footwear, passenger transport by road, miscellaneous services relating to dwellings, hairdressing salons and personal grooming establishments, and repair of furniture.

Others include vehicle spare parts, pharmaceutical products, motor cars, maintenance and repair of personal transport equipment, paramedical services, motorcycle, dental services, and bicycles. The impact of the petrol price hikes could go beyond simply pushing up transport costs. It is also expected to affect the cost of producing goods and services. In particular, the prices of food, clothing and footwear, furnishings, as well as housing and utility costs will certainly increase. In addition to higher petrol prices, the cost of producing electricity from petrol-powered generators is also expected to rise. The impact of a higher petrol price on food is likely to resonate with most Nigerians. 

Rough estimates suggest that transport costs account for about 10% of the total cost of producing food in Nigeria. The above statistics from the NBC shows clearly that this economy and Nigerians do not need any increase in fuel price until this pandemic and its negative impacts are over. Nigerians have passed through a lot this past year and now and deserve a respite from any more burdens.