In what appears to be a cost-reflective measure, the federal government yesterday approved the reduction in pump price of Premium Motor Spirit (PMS), popularly known as petrol, from N145 per litre to about N125 with immediate effect.
The approval is not unconnected with the coronavirus-triggered lingering volatility in the international oil market, which led to substantial fall in crude oil prices from $60 per barrels a few weeks ago to between $29 and $30 now.
The Minister of State for Petroleum Resources, Timipre Sylva, who announced the reduction in the petrol pump price by the government, is believed to have canvassed the fiscal measure in a presentation he made at the Federal Executive Council (FEC) chaired by President Muhammadu Buhari.
Assuring that PMS pump price reduction would also be extended to other petroleum products, Sylva explained that President Buhari approved the reduction so that Nigerians can benefit from a direct effect of crash in global oil prices.
As expected, mixed reactions from major stakeholders have continued to trail the latest fiscal measures by the government, with many endorsing the petrol pump price reduction, while others feel the pump price should have been lower given the current landing cost of refined products estimated at about N62 per litre.
Reacting to the slashed pump price, the Chief Executive Officer of Major Oil Marketers Association of Nigeria (MOMAN), Mr. Clement Isiong, said the association was in support of government's efforts at this trying time.
Isiong pointed out that though the reduction was not so favourable to the government considering the fact that a lot of debt had been incurred, the action was commendable.
He said: "We must all support the government to paddle the economic boat in this turbulent period. As we all know, we don't when exactly the problem will subside. So we must put sentiment and business interest aside and support the government."
The MOMAN chief said he could not say yet whether the reduction to N125 was good or not, adding that "but for government to have reduced at all, we should support it."
Commenting, an economist and lecturer at the Lagos Business School, Dr. Bongo Adi said the oil price reduction was not enough.
He clarified: "The oil price has lost about 60 percent of its value. If that is the case, we expect nothing less than 60 percent drop in the pump price. But what are they giving us? If they are giving us less than 60 percent, it doesn't make sense. I am looking at N80 per litre."
On the need for the government to maximise some revenues locally because of the drop in revenues from crude oil sales, he said that is unacceptable.
"What name do we give to that? We already have fuel surcharge. We have VAT and we are paying. They cannot be telling us they are paying subsidy. How much are they saving from subsidy now that the oil prices are low?" he said.
According to him, there is no full information about what is going on in the downstream sub-sector, adding that the government must provide full details on the landing cost and other details.
Reacting to the fuel pump price downward review, the Lagos Chamber of Commerce and Industry (LCCI) described the slash as a welcome development, especially in the light of the slump in global crude oil price.
The Director General of the Chamber, Muda Yusuf, however, noted that what is desirable ultimately is for the federal government to come up with an exit strategy to pave the way for a complete liberalisation of the downstream oil sector.
"This is an opportune time to do so. Over the years, the Nigerian economy has suffered huge losses as result of over-regulation of the downstream oil sector.
"The sector had been denied private investment over the years because of the challenge of the pricing policy. We hope that this price review signals the commencement of the liberalisation of the sector," Yusuf added.
In his remarks, the Chairman, Western Zone of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Alhaji Debo Ahmed said the reduction "is fair and good", stressing that it is in line with what the association had clamoured for.
He enthused: "Since they have done this, we are really very happy."
Ahmed, however, urged the federal government to give the independent marketers a time-frame for the enforcement of the new price so that no marketer, who had already bought product at old price, would run at a loss.
He also suggested that the NNPC could credit individuals with the difference "because nobody will like to sell at a loss."
The Chairman of the Manufacturers Association of Nigeria (MAN) Export Group, Chief Ede Dafinone, in his reaction said: "My understanding is that the government has reviewed the international oil price and has found out that the landing cost has gone down by N20 and has therefore reduced the pump price by N20 and that is a welcome development."
A financial expert and Managing Director, Cowry Assets Management, Johnson Chukwu, while lauding the measure, however, felt the N125 per litre was not cost-reflective and charged the government to immediately reduce petrol pump price to reflect the current landing cost of about N100 per litre.
He said: "If we take the current landing price of N100 into account, it means we are selling at N45 higher than the landing cost and that is forcing people to pay tax to government. If we sell at N100, that translates to lower transport cost, lower cost of food items and that will moderate inflation."