Dr. Boniface Chizea, Chief Executive Officer of BIC Consultancy Services, has cautioned the Nigerian National Petroleum Company Limited (NNPCL) over its continued disclosure of changes in prices of Premium Motor Spirit (petrol) in a deregulated market, warning that such disclosure is unacceptable and should stop, since the national oil company is no longer enjoys the monopoly of the downstream market.
Dr. Chizea made this known in a statement he shared with EnergyDay on Thursday.
He noted that the NNPCL has changed the pump prices twice under two months from N195 per litre before the swearing of the President Bola Tinubu to N530 per litre after the removal of subsidy payments, and now N617 in Abuja but higher in most other cities in the region.
According to him, these are interesting times to live in Nigeria considering the fact that increases in the pump price of fuel have a holistic effect on prices across the board in the economy and a terrible add-on effect on the inflationary spiral in the economy.
He therefore emphasised that the announcement that NNPCL has increased the pump price of fuel is not in sync with the prevalent scenario under a deregulated regime.
Dr. Chizea said, “There is something that does not quite jive with the game in town, despite the revelation that the subsidy has been removed and that the prices have been deregulated.
“If we now operate in a deregulated market, and that the NNPCL is no longer in charge, therefore something is indeed wrong with NNPCL making the announcement in the first place.
“Simply, it should just be announced; if at all any announcements were required that pump price of fuel has gone up to N617.
“In fact, I did see a headline that claimed that the pump price in Ilorin, Kwara State is now N700! I have not bothered to corroborate this alarming, screaming, and frightening announcement.
“Maybe because we are in transition and would surely get there as matters crystalize. And therefore, the journey to a deregulated market, to say the obvious remains work in progress.
“It has been reported by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) that 66 petroleum products marketing companies have been licensed to go into the importation of fuel, but 10 companies have placed orders for delivery during the third quarter July/September 2023.
“Three companies have received supplies of the imported petroleum product. The goal is for NNPCL to stop importation leaving the marketers to take over.
“What is worrisome is that we have still retained the old mindset, procedures, and processes while claiming to have deregulated.
“In a deregulated environment you will never see this level of quantum increase in one fell swoop. The rate of increase in pump price is alarming and could provoke protests which the Country should better avoid.
Dr. Chizea therefore cautioned that his observation must be seen as a food for thought which should engage and arrest the attention of the authorities.
While emphasizing that the overall improvement in the quality of life of the average Nigerian is important, Dr. Chizea therefore expressed concerns about rising costs of electricity, fuel, and food items in Nigeria, which are putting pressure on Nigerian households, adding that the issue could spark another round of social unrest.
He therefore cautioned the Government against actions that seems to take public reactions for granted. According to him, the market does not respect such niceties, especially as Labour Unions have sounded belligerent as we anticipate their response.
He noted that the Labour Union has lamented that the Government itself went to court to checkmate proposed industrial action but not respecting the status quo ante, and has gone ahead to increase the price of petroleum products.
Dr. Chizea said, “There was certainly a consensus across the country that the subsidy payments were not good and must be stopped. But the only problem is that we have not been sequential, deliberate, and intentional as we did so. My preferred approach has always been that we should tackle this problem from its root cause.
“There will be no subsidy to pay if we stopped importation today. So, why not aim to stop importation in the shortest possible time?
“And this target is within reach with the Dangote Refinery inauguration awaiting the commencement of operations. We should have poured all efforts to ensure that this Refinery came onstream in the shortest possible time.
According to him, I recently received confirmation from the Dangote refinery that the indicated July/August commencement for the first products from the refinery to hit the market is still on course.
He said, “As far as we are concerned, we see Dangote Refinery coming on stream as a game changer, which has the potential for making positive impacts on the fortunes of the economy with quick results.
Dr. Chizea also noted that the argument from some quarters that the Dangote refinery will not impact local pump price, is the product of shallow thinking.
He said, “Nigeria will supply crude for the refinery in Naira and the refinery will sell products to Nigeria also in Naira. Automatically, the negative impact of exchange rates is out of the calculations.
“Other add on costs due to importation such as freight, insurance, demurrage will no longer apply. Even as we expect Dangote to sell to Nigeria at the going market rates in Naira, there is no way the pump price will not be drastically reduced.
He therefore suggested the Government should also encourage the modular Refineries to get serious with targeted incentives to commence operations.
He said, “Though we have been assured that the maintenance of the Port Harcourt Refinery is almost completed, we remain convinced that there is no point in allowing the local refineries to continue to construct drainpipes on the treasury.
“We reached the firm conclusion that the government does not have the capacity to keep refineries in operation profitably. Our well-considered recommendation will be to take them to the market for sale.
“But we must not continue to sit on our hands and just allow such low-hanging fruits to go begging. We better get cracking on these recommendations.
We have been informed that what is responsible for the recent hike in pump price is that the price of crude .
He said that it is an irony, for a country, like Nigeria which is the eighth producer of crude in the world has its citizens groaning because its price went up recently from 70 to 80 dollars a barrel.
This according to him, has been the dilemma of the Nigerian situation.
Dr. Chizea therefore noted that there is also the explanation that pump price must reflect the reality of the market, which is translated as the falling rate of exchange.
He said the problem was compounded with the removal of multiple exchange rates in foreign exchange market. He noted that ending the multiple exchange rate is a laudable long anticipated objective, but asked “what about the problem of sequencing?”
He said, “What we have now done is pile up pressure on our citizens which runs contrary to what should be the focus of governance.
“The misery index in the country with 130 million out of 200 million designated as suffering from multi-dimensional poverty and 54% youth unemployment rate should be to work to bring some succour and not otherwise as it is currently the case.
Once again, the root cause of the multiple exchange rates in the country is a combination of lack of productivity to earn badly needed foreign exchange and the consequences of macroeconomic instability which is anathema to attracting foreign investors.
“There are of course a number of imperatives we need to address to make the Nigerian environment attractive; security issues, stability of policies, infrastructural bottlenecks, ease of doing business considerations; entry visa challenges, clearance experience at our points of entry, keeping inflation under control etc.
“It is not realistic to expect all of these to be handled in one fell swoop. But we must get cracking. As should be expected there are far-reaching consequences, most of which are unpalatable. I don’t know how many of us fully appreciate the consequences of an inflation rate that is close to 23%.
“For a very long time, the authorities have targeted and worried about attaining a single-digit inflation rate. But for now, we must admit that we have lost that battle.
“No doubt we have all felt the quick and sudden increases in the price of goods and services which have negatively impacted the misery index in the land. I have not seen anything like the current galloping rate of price increases in the economy before,” the CEO, BIC Consultancy Services said.