Amidst growing criticisms by Nigerians over the latest increase in the retail price of petrol, the Federal Government says it is not contemplating any further palliative than those already in existence for the people.
On Monday, the PPMC, the petroleum products marketing and distribution arm of the Nigerian National Petroleum Corporation (NNPC), raised the ex-depot price of petrol from N113.70 to N147.67 per litre.
Although the Petroleum Products Pricing Regulatory Agency, PPPRA, responsible for the regulation of the prices of petroleum products in the country, is yet to make an official pronouncement on what the new price of petrol will be for the month, products marketers have since adjusted their pump prices to about N160 per litre.
Since then, various groups and individuals, including the leading opposition political party, the Peoples Democratic Party (PDP) and the labour movement, the Nigeria Labour Congress (NLC), have condemned the new price as a demonstration of the government’s insensitivity to the plight of the people.
Both have vowed to mobilise the people to oppose the hike, describing the timing as wrong, in view of the negative impact of the COVID-19 pandemic on the people’s overall wellbeing.
But, despite the criticisms, the Minister of State for Petroleum Resources, Timipreye Sylva, said on Thursday in Abuja that there is nothing the government can do to intervene in the new petrol price as it a direct fall out of the deregulation policy announced in the petroleum sector in March.
“There is no going back on the deregulation policy in the downstream sector of the petroleum industry. It is a necessary economic policy. Successive administrations had desired to achieve deregulation without success. Some lacked the political will, while for others the timing was not appropriate.
“But, there is a direct correlation of the price of the refined products to the crude oil price, as it is refined from crude oil. Therefore when the crude oil price goes up, the price of the refined products and other derivatives go up, and vice versa,” he said.
When crude oil prices dropped earlier in the year, he said the government was able to transfer the benefits to the consumers by reducing the price of petroleum products at the pump nationwide.
The minister said at that time, the government never minced words in letting the people know that when the price of crude oil goes up at the international market, some of those movements would likely reflect the pump, which is what is happening today.
He said the current price increase was an inevitable policy direction, especially at this time of COVID-19 pandemic, which saw crude oil prices crashing to the negative zone, with crude oil price dropping to below $10 per barrel.
At that time, the Minister said, the country’s earnings from oil was not sufficient to support subsidy payment, with claims rising to over N1trillion every year at the pump and the foreign exchange to import the products.
“Subsidy benefited the rich against the poor. The country cannot afford the payment of subsidy. Deregulation meant government withdrew from the importation of petroleum products and allowed market forces to determine prices of petroleum products, to allow government to play its traditional role of protecting the consumers against excessive profiteering by the marketers,” he said.
With crude oil price currently at about $45 per barrel at the international oil market, Mr Sylva said achieving that price level from less than $10 per barrel last April necessitated reducing Nigeria’s output in compliance with the Organization of Petroleum Exporting Countries (OPEC) resolution to curtail output to stabilise the market and boost prices of crude oil at the international market.
Since the decision, he said, Nigeria has cut its daily production from over 2 million barrels per day to about 1.412 million barrels per day, almost halving the country revenue earnings.
“Deregulation is s necessary policy direction. I agree it would come with a few pains initially. But I can assure you that when we all overcome it, we will be happy that we took the decision,” he said.
“In terms of palliatives, we have had a lot before in this country which did not take us anywhere. There is no government that has introduced as many palliatives as the current government, namely the N-Power scheme, Trader Moni, Schools feeding programme, etc., rollout scheduled for the end of this month.
“The solution to the current problem should be a little more sustainable, by providing cheaper and cleaner alternative fuels in terms of LPG and CNG, which has started a pilot scheme in converting Keke NAPEP in Port Harcourt.”
The minister said the LPG (Liquefied Petroleum Gas) and compressed natural gas (CNG) introduce cheaper and cleaner alternative fuels to ensure the people are not
On how much the government has saved so far since the removal of fuel subsidy and introduction of deregulation, the minister said apart from the removal of about N500 billion provided in the 2020 budget for fuel subsidy, another N500 billion was cut as FOREX differential, totaling N1 trillion as a result of deregulation.
“The benefits will begin to show in next year’s budget when the provision for subsidy and FOREX differential would be removed, and show up in a lot more capital projects,” he said.
He further stated that the Federal Government had concluded plans to merge the Petroleum Products Pricing Regulatory Agency, PPPRA, and the Petroleum Equalisation Fund, PEF, into one entity called The Authority.
He said: “It became necessary that the country cannot sustain subsidy payments, hence the decision to deregulate. Government has stopped subsidizing petrol at the pump, but will now play its traditional role of protecting consumers from exploitation, by ensuring that marketers do not profiteer at the expense of ordinary Nigerians and consumers of the product.
“We are no longer in the business of fixing prices: Wee have stepped back and allowed market forces to determine the prices. If crude oil price go up or down, it would reflect at the pumps.”