Fuel Price: NLC warns FG against World Bank’s N750/litre proposal
The Nigeria Labour Congress issued a warning to the Federal Government on Thursday, cautioning against heeding the World Bank’s suggestion to raise the pump price of Premium Motor Spirit (petrol) to N750 per litre.
Benson Upah, the NLC’s Head of Information, expressed in an interview with The PUNCH that any further increase in petrol prices could result in chaos within the country.
He urged the government to reject the World Bank’s proposal, advocating for the continuation of the current pricing range of N620 to N650 per litre in most locations nationwide.
Oil marketers elaborated on the situation, asserting that if the government were not subsidizing the product, the cost of Premium Motor Spirit (PMS) should be approximately N1,000 per litre.
On Thursday, the government refuted the assertions made by both oil marketers and the World Bank concerning the reinstatement of subsidy on petrol in Nigeria. The World Bank had, on Wednesday, recommended that the Federal Government cease subsidy payments on petrol and increase the product’s cost to N750 per litre.
The World Bank argued that the subsidy might still be in effect as current fuel prices in Nigeria did not reflect the actual costs, emphasizing that Nigerians should be paying around N750 per litre for Premium Motor Spirit (PMS) instead of the existing price of N650 per litre.
During the presentation of the Nigeria Development Update, December 2023 Edition in Abuja, Alex Sienaert, the World Bank’s lead economist for Nigeria, claimed that the government is still making continuous subsidy payments for petrol.
Sienaert pointed out that petrol prices do not appear to be fully adjusting to market conditions, suggesting a potential partial reinstatement of the subsidy.
He emphasized that estimating the cost-reflective retail price of Premium Motor Spirit (PMS) and assuming importation at the official foreign exchange rate indicated a need for a higher price, proposing that petrol should be around N750 per litre instead of the current N650 per litre paid by Nigerians.
In response to the World Bank’s statement, the labor movement expressed concern that any further increase in fuel prices would inevitably lead to widespread disorder.
Upah, the Head of Information for the NLC, criticized the World Bank as a predatory institution indifferent to the welfare of Nigerians. He argued that the initial hike in the pump price of PMS had already caused significant issues in Nigeria.
Upah characterized the World Bank as a globalist entity from the northern hemisphere, asserting that it lacked consideration for the global south and served as a tool for the global north to justify its actions against the south.
The World Bank, according to Upah, bears significant responsibility for the economic downfall of global south nations, offering a one-size-fits-all solution.
He argued that the institution, seated in Washington, disregards the well-being of Nigeria and its people, freely expressing opinions or influencing leaders as it wishes.
Upah contended that the current petrol pump price regime has severely harmed the country, and advocating for an increase to N750 per litre would only lead to widespread chaos.
Upah criticized the World Bank’s hypocrisy, pointing out the disconnect between price and earning capacity. He highlighted the vast difference in minimum wages, with Nigeria at N30,000 and the United States at N1.5 million, where the law enforces the minimum wage.
Given this, he urged the government to ignore the World Bank’s advice and instead focus on combating corruption in the downstream sector of the petroleum industry and reducing the high cost of governance.
The Federal Government has rejected the World Bank’s assertions regarding the continuous subsidy payment for petrol.
During an interview on Channels Television on Thursday, Mohammed Idris, the Minister of Information and National Orientation, clarified that President Bola Tinubu had clearly communicated from his first day in office that his administration would not maintain the subsidy on petrol.
According to Idris, the elimination of the petrol subsidy has resulted in a boost in revenue to the Federation Account. He emphasized that subsidy is no longer in place, reiterating the President’s stance that there would be no subsidy on petrol.
Idris pointed out that the absence of fuel subsidy has provided the government with substantial funds for various initiatives, acknowledging that while the resources may not be sufficient, the removal of the subsidy is a permanent and positive development.
He further stated, “There are situations where the government must intervene to prevent things from deteriorating too much. It is the government’s duty to ensure stability. Each regulation comes with its self-adjusting mechanism, but I can assure Nigerians that the subsidy has been eliminated.
Examining the funds flowing into the Federation Account and the substantial revenues received by the states, it becomes evident that there is a collective desire for the removal of the subsidy.
The next consideration is how to utilize the resources freed up by the absence of subsidy, and a thorough examination is necessary to ensure that Nigerians derive maximum benefits. The subsidy has indeed been eradicated.”
Marketers’ Response
In response to the Federal Government’s assertion that the petrol subsidy has been eliminated, Chief John Kekeocha, the National Secretary of the Independent Petroleum Marketers Association of Nigeria, challenged this claim. According to Kekeocha, the government’s statement is unfounded, and he argued that removing the subsidy could potentially lead to unrest.
He criticized government officials who, in his view, lack a practical understanding of the actual circumstances and accused them of causing confusion.
Kekeocha emphasized that anyone familiar with global market dynamics would not assert that the subsidy on Premium Motor Spirit (PMS) has been eliminated.
He further pointed out the discrepancy in currency exchange rates, citing that a pound is currently valued at around N1,480 or more, while a dollar is approximately N1,200 or more. Using these figures, Kekeocha questioned the basis for claiming the absence of subsidy on PMS.
In his perspective, the government continues to subsidize PMS, and he warned that without this subsidy, if the price were to reach N1,000 per litre, it could potentially ignite social unrest in the country.
Government’s Apprehension
The government is facing apprehension, as Chief John Kekeocha emphasizes that necessary steps were not taken before the removal of the petrol subsidy.
He argues that government officials are now engaging with organizations to understand what should have been done prior to subsidy removal.
According to Kekeocha, any informed government personnel familiar with the intricacies of the downstream oil sector would not assert that the subsidy has been eliminated. He asserts that there is indeed a subsidy in place, evident in the government’s efforts to keep the fuel price at N650 per litre.
When questioned about the World Bank’s suggestion of a pump price of N750 per litre, Kekeocha maintains that even at this price, there is still a subsidy. He draws a comparison with fuel prices in London, which range from N1,000 to N1,200 per litre, suggesting that this should be the benchmark range for consideration.
Adding to the discussion, the National Public Relations Officer of IPMAN, Chief Ukadike Chinedu, shared with a correspondent that the current subsidy on each litre of petrol should be approximately N400.
Shift from Quasi-subsidy to Full Subsidy
I previously mentioned the operation of a quasi-subsidy, but now, that quasi-subsidy scenario has vanished. The situation has transformed into a full subsidy on Premium Motor Spirit (PMS) due to the devaluation of the naira.
With the current exchange rate at about N1,100 to a dollar, importing petrol at this rate would peg the selling price of PMS around N950 or N1,000 per litre.
This calculation is based on the historical correlation between the dollar’s value and petrol prices, exemplified when the dollar was N750, and petrol was sold at N595 per litre. There is no mystery or extraordinary factor involved in this adjustment.
Furthermore, the speaker highlighted the escalating cost of diesel. Currently sold at over N1,000 per litre, the disparity between the cost of diesel and that of PMS is minimal, typically ranging from N5 to N10 per litre under normal circumstances.
Call for Nationwide Demonstration
Ifeanyi Egwuagu, the Convener of the Nigerian Unity and Progressive Forum, urged Civil Society Organizations to initiate a peaceful nationwide demonstration.
The purpose is to demand concrete actions from the government to alleviate the ongoing hardships faced by Nigerians. In a statement from Abuja, Egwagu expressed concern about the prolonged economic challenges confronting the majority of Nigerians.
He specifically accused the Tinubu administration of exacerbating the sufferings of Nigerians through the removal of the subsidy.
While acknowledging the potential long-term benefits of subsidy removal, Egwagu emphasized the need for the government to implement sustainable measures to mitigate the immediate hardships associated with this decision.
The existing administration’s lack of a clear vision to improve the socio-economic well-being of Nigerians is evident to me. In my view, President Tinubu’s approach appears to have reversed the order of priorities.
If there were allegations of a powerful cabal embezzling subsidy funds, the logical step would be to target the cabal directly and recover the misappropriated wealth from them.
Unfortunately, I don’t perceive this government effectively combating corruption as anticipated by conscientious Nigerians.
Fuel shortages
In a parallel development, the Independent Petroleum Association of Nigeria announced its intention to hold discussions with Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, to request increased supply of Premium Motor Spirit, commonly known as petrol.
This announcement came in response to inquiries about the association’s actions to address the queues for petrol at filling stations run by both major and independent marketers, as well as the insufficient products among IPMAN members.
The newly elected National President of IPMAN, Abubakar Maigandi, pledged during the National Delegates Election in Abuja to exert efforts towards ensuring the smooth distribution of petroleum products nationwide.
Regarding the queues at filling stations and the product shortages among independent marketers, Maigandi stated, “We will communicate with the GCEO of NNPC to ensure that all the necessary products are supplied to us, enabling our filling stations to have PMS and other products readily available.”
Regarding the Federal Government’s initiative to implement Compressed Natural Gas (CNG) as a substitute for Premium Motor Spirit (PMS), the newly appointed IPMAN leader expressed enthusiastic support, deeming it a positive development.
He assured that all members of the association would actively engage in and support the President’s CNG program.
Maigandi acknowledged the solidarity within the association during the elections that led to his presidency. Other contenders for the position voluntarily withdrew, offering their endorsement for him to lead.
Emphasizing the importance of unity, he expressed the need for their collective effort to propel the association forward and contribute to advancing the oil sector under President Bola Tinubu’s administration.
Aminu Abdulkadir, the Chairman of the Board of Trustees for IPMAN, affirmed the success of the elections in appointing new officials to govern the association for the next five years.
He highlighted the smooth process and the absence of dissenting voices, expressing satisfaction that the democratic expression of the members’ wishes had taken place. Abdulkadir also noted that IPMAN, as a crucial stakeholder in Nigeria’s downstream oil sector, enters a new chapter with its latest leadership.
Newly appointed officials of the association include Adekunle Fasola as the National Vice President, James Tor as the National Secretary, Suleiman Yakubu as the Assistant National Secretary, and Umar Aliyu as the National Treasurer.
Other key positions are filled by Ben Odjugo as the National Organising Secretary and Nnanna Oru as the National Legal Adviser.
The Federal Ministry of Finance announced on Thursday that it will disclose and widely publicize details of the plan to scrutinize the dollar oil revenue flow resulting from the financial gains of fuel subsidy removal.
Stephen Kilebi, the Director of Press and Public Relations, provided this clarification in response to a correspondent seeking more information about the earlier indication by Finance Minister Wale Edun to audit the Nigeria National Petroleum Corporation Limited.
Kilebi emphasized that the ongoing audit is part of the government’s commitment to transparency, with all processes and procedures to be made public upon completion.
On Thursday, the Federal Ministry of Finance stated that it will release and publicize details of the plan to scrutinize the dollar oil revenue flow resulting from the financial gains of fuel subsidy removal. Stephen Kilebi, the Director of Press and Public Relations, offered this clarification in response to a correspondent’s inquiry about the earlier indication by Finance Minister Wale Edun to audit the Nigeria National Petroleum Corporation Limited.
Kilebi emphasized that the ongoing audit is part of the government’s commitment to transparency, and all processes and procedures will be disclosed to the public when completed.
In a telephone interview, he stated that the details should not be in the public domain for now, as the audit is a work in progress, and the government will inform the public about the procedures and completion of the audit in due course.
The minister had previously disclosed during a panel session at the release of the World Bank’s Nigeria Development Update that the government was prepared to examine the revenue flow from the National Nigerian Petroleum Company Limited.
In its report, the World Bank raised concerns about transparency and accountability regarding the financial gains resulting from the removal of fuel subsidies by the NNPCL and the impact on federation revenues.
The World Bank highlighted the need for more clarity on oil revenues, particularly the fiscal benefits arising from PMS subsidy reforms, despite visible gains from exchange rate reforms.
The institution pointed out a lack of transparency regarding NNPC’s financial gains from subsidy removal, ongoing subsidy deductions, and the impact on federation revenues.
It also questioned why retail petrol prices remained relatively stable since August, despite fluctuations in exchange rates and global oil prices. The World Bank noted that net oil revenue gains for the federation were lower than expected after the fuel subsidy removal.
The intensified examination follows revelations by former Central Bank Governor Lamido Sanusi, who, just a week prior, raised concerns that the NNPCL might not be remitting sufficient dollars to the Federation Account despite the removal of subsidies.
Source: punchng