Hamisu Muhammad
4 January 2009
With its abundant hydrocarbon resources, Nigeria is ranked number one oil-rich nation in sub-saharan Africa.
Nigeria's estimated oil reserve is expected to reach four million barrels per day and more opportunities will soon awash the country if the long-awaited oil explorations commence this year at the Lake Chad Basin.
Not going too long, the hydrocarbon resources remain the major source of revenue for the government at federal, states, and local government levels. This made the issue of petroleum very important. Not less then two industrial actions take place every year as a result of issues related to pump prices of petroleum products. Even the last industrial action embarked upon by the Nigeria Labour Congress (NLC) was to protest the increase in the petrol price by the Obasanjo administration in 2007.
Last year, when the crude price hit a record high at $147.27 a barrel in July before plummeting to as low as $33.87 in December, government cried out several times while selling a litre of petrol at N70/litre. The government said is spending on subsidy nearly crippled the economy. The government's economic team had to embark on a nationwide campaign to meet with the stakeholders, with the objective of convincing them to remove the subsidy it offers on petroleum products. The campaign did not achieve the desired effect, because it received negative comments and reactions, especially from the labour unions.
The argument by government was that it estimated the subsidy would gulp about N700 billion for the year 2008 alone. The campaign, according to the Minister of State for Energy (Petroleum), Odien H. Ajumogobia was to look for possible options that will be acceptable by all.
Now that the much-touted petrol subsidy by government has turned into a healthy profit, many stakeholders have been awaiting moves by government to enter into negotiations with them on how to bring down the pump prices.
Sometime last month, a member of the cabinet and special adviser to the president on petroleum matters, Dr. Emmanuel Egbogah said petroleum product pump prices would be reduced by not less than 25 per cent. But a few days later, government denounced his statement, saying government is not ready to review downward the price of petroleum products because the sector is not fully deregulated. The minister called on Nigerians not to expect the benefits of oil free fall.
The argument he presented was that if Nigerians had agreed to a full deregulation of the sector as canvassed by the former regime of President Olusegun Obasanjo, the current low prices of crude oil in the international market could also have reflected in a drop in the price of petroleum product in the country.
Highlights of other countries including some African countries that have been regulating their petrol market like Nigeria, shows that some of them have since reflected the international price of crude to their domestic pump prices.
Reports show that countries like Burundi, Kenya, South Africa, Rwanda and Zambia have already taken drastic measures to lower pump prices during the past three months.
Reuters reported that South African petrol pump prices will fall by between 1.34 Rand and 1.37 Rand a litre, or 18 percent, and diesel prices will drop by about 20 percent from January 7, the government said on Friday.
A statement from the minerals and energy department said the pump price for 95 grade petrol will be 6.01 Rand ($0.638) a litre in the main commercial hub of Gauteng province.
In Guinea, the pump prices of oil products have dropped by 12 percent, from 5,500 Guinean Franc to 4,800 Guinean Franc for the litre of gasoline, diesel and paraffin, an official source told APA a state media. This measure came into force as of 1st January.
In Tanzania, the Director General of the Energy and Water Utility Regulatory Authority (Ewura), Haruna Masebu, told newsmen that there was over 30 per cent drop in fuel price in the last two months, adding that there would be a further drop, saying petroleum products have recorded 30, 40 and 50 per cents decrease in petrol, diesel and kerosene respectively
Sunday Trust gathered further that countries like Philippines and Singapore in Asia have already joined the queue in reducing domestic fuel prices. Seaoil Philippines Incorporated led the latest round of price cuts, implementing a P2 per litre reduction for its diesel, effective 2 pm last Friday, while in Singapore, pump prices slid again on New Year eve, with Shell leading the way at 2pm, lowering prices by about four cents per litre for its diesel and three unleaded petrol products. Singapore Petroleum Company and Caltex followed suit at 3pm.
In the United Kingdom, already, TESCO, Britain's biggest independent petrol retailer, gave motorists a good start to the New Year at the forecourts by slashing the cost of a litre of petrol and diesel by 3 percent. The reductions are expected to lead to a new round of cuts in the supermarket petrol price war, where the cost of filling up has reached a three-year low.
Back to Nigeria, the Independent Petroleum Marketers Association of Nigeria (IPMAN) which controls over 70 percent of the filling stations in the country recently gave its weight on reduction of pump prices, saying Nigerians deserved to benefit from the continued fall in oil prices in recent times.
As a result of the collapse in the international prices of crude oil, the landing cost of petrol fallen below N39 per litre. This development has encouraged industry stakeholders to continue to call on government to reduce pump prices of petroleum products. Last week, the global crude price tumbled, reaching a historic record low at $37 per barrel. But the Nigerian National Petroleum Corporation (NNPC) said it is not yet time for reduced pump price as government tries to recover subsidy.
Speaking on the issue to Sunday Trust, President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Comrade Babatunde Ogun said the government's position is unjustifiable. Ogun said it is long overdue to have lower pump price in the country, adding that it is unfair for government to hide under subsidy recovery as a reason why it has failed to adjust downwards the pump price.
Comrade Ogun said government has no reason to deny Nigerians their right to cheaper fuel prices, because it wants to recover subsidy. "It is wrong for government to use this period to recover money spent as subsidy." "Nigerians should not be suffering unnecessarily because government wants to recover subsidy. They are just beating about the bush, but I think when the time comes we will take it on".
He said if the landing cost is as low as N38 or so, the petrol price should not go beyond N55 per litre, "the price should not be more than N55 because the margin of N9 is okay". "The petrol price depends on the landing cost. The landing cost is what will determine how much the pump price should be. If the landing cost is N38, like what it is now, then the price should not be more than N55 because that is the margin of N7 to N9."
Also, speaking on phone, the president of the Manufacturers Association of Nigeria (MAN), Alhaji Bashir Borodo said though government is hoping that the international crude price will go up soon, reduction in pump prices is something that will go down well with Nigerians. According to him, now is the best moment to reduce pump prices because that will help stimulate the economy. He said manufacturers all over the country rely on the petroleum products as energy source. "As soon as government announces reduction in pump prices, other commodities will follow suit."
He decried high transportation cost in the country, saying the cost is too high which, at the end, increases the prices of commodities in the market. When contacted on the issue, Head, Downstream, Department of Petroleum Resouses (DPR), Alhaji M.D Ladan, said DPR has nothing to do with pump prices of petroleum products because it is purely the responsibility of the Petroleum Product Pricing Regulatory Agency (PPPRA). He said "our own is to get directives from government and implement such directives".
Efforts to speak with the PPPRA spokesperson, Victor E. Ononokpono proved abortive as his lines were not available at press time. On the pricing templates published on its website, PPPRA said the landing cost of Premium Motor Sprit (Petrol) was as at Wednesday last week N38.24/litre and the expected price (that is landing cost plus the margin) was N51.44/litre.
The PPPRA template further revealed that as at December 31, 2008, marketers were enjoying over recovery (profit) of N15.38 per litre of petrol sold to Nigerians. By implication, the much touted petrol subsidy by government has now turned into a healthy profit. Last week, in his New Year message, the President of the Nigeria Labour Congress (NLC), Comrade Abdulwaheed Ibrahim Omar also joined forces in condemning any attempt by the federal government to increase fuel price. He said government will face tough protest by union if it attempted to increase prices of fuel in the market.
"Increase in pump prices or even removal of subsidies will not make any difference in the service delivery of government as long as it is business as usual. The challenge is to ensure prudent management of available resources. The crisis in the oil sector has continued unabated years after the end of the regimes of military cabals and despite years of NLC's campaigns for a self-reliant petroleum products policy. As a result, our nation has continued to be dependent on imported products," he said.
Omar said there was the urgent need for the federal government to ensure nationwide enforcement of the current official pump prices of petroleum products such as kerosene, petrol and diesel so that Nigerians can enjoy unified prices wherever they are. Comrade Omar said the congress believes that the continued importation of refined petroleum products by the Federal Government is a matter of choice as, according to him, the country's refineries can be fixed and remain in production only if government summons courage and does the right thing. Omar said the government should implement people-centred policies rather than policies dictated by external institutions and the failed market forces.
He said the recent case of N64 billion corruption against officials of the Petroleum Products Pricing Regulatory Agency (PPPRA) further reinforces the urgent need to do a fundamental overhaul and cleansing of our petroleum sector and the NNPC.
Crude oil prices began 2009 the same way they spent the most of the second half of 2008 - going down. The price peaked at $147.27 a barrel of crude oil in July before plummeting to as low as $33.87 on December 19, 2008. Reports in the international crude oil markets, showed a continue fall in price as at Friday last week. Light, sweet crude for February delivery on Friday fell $2.21 to $42.39 a barrel in electronic trading on the New York Mercantile Exchange by mid-afternoon in Europe. In London, February Brent crude fell $1.87 to $43.72 a barrel on the ICE Futures exchange
With the global economic turmoil, many countries are searching for ways out to abort the long run negative implications of the recession. Unless the domestic economy receives the necessary support by government, the image of the nation will continue to remain low by the international communities. Nigeria is important to join these nations in order to empower its citizenry.
If the government and those agencies responsible for deregulation will be bold enough to announce reduction in pump prices of the petroleum products and engage in enlightenment campaign on how the system will be when deregulation takes effect, many will support the idea.
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