When the price of crude oil started crashing in August last year, expectations were high that domestic pump prices of refined petroleum products would also decline, giving businesses and individuals a much-needed relief. But it was only late in January that the government compelled retailers to clip N10 per litre from the price of petrol. However, pump prices of diesel, aviation fuel and others have remained high and reactions have ranged from fury to dismay.
Average oil prices began a downward spiral seven months ago, and from around $107.95 per barrel in June last year, it knocked the barrel at $45-$48pb, averaging $60pb in October and November. Naturally, consumers and businesses expected correspondingly lower prices at the pumps. For the price of petrol especially that is fully regulated, consumers waited for long before the government finally responded last month, by reducing the pump price from N97 per litre to N87 per litre. For many, this was coming rather late and was viewed as barely enough since crude price had fallen by about 60 per cent. To this, marketers and the government remind us that the corresponding exchange rate volatility and inflation erode part of the price gain that should follow lower crude prices.
In the diesel, aviation fuel, Low Pour Fuel Oil and kerosene segments, prices have stayed high. Marketers have, according to a Lagos-based business tabloid, raked in up to N132 billion in eight months by maintaining diesel prices at N145 per litre even when crude oil prices had crashed by over 55 per cent. Though AGO (diesel), HHK (kerosene), and ATK (aviation fuel) prices were deregulated in 2006, the Petroleum Products Pricing and Regulatory Agency, that sets the cost and pricing template and the Department of Petroleum Resources, the industry regulator, have been ineffective.
PPPRA’s website showed the landing cost of diesel at N99.03 in February and after margins, arrived at an Indicative Open Market Price of N108.37, meaning that marketers are ripping Nigerians off. The same chicanery is evident in LPFO and aviation fuel.
Kerosene is a special case. Deregulated along with diesel in 2006, the government has nevertheless been spending unbudgeted money on a supposed subsidy through the Nigerian National Petroleum Corporation, which does pretty much as it likes and routinely refuses to be accountable. So, while the NNPC says it has fixed a N50 per litre price, it is only available at between N120 and N150 per litre at retail outlets.
Only corruption explains the government’s insistence on a subsidy that drains the treasury and delivers no benefit to the economy or to the citizenry, serving only to oil a system of graft and impunity. The government should bow to the wishes of the people and stop the so-called kerosene subsidy immediately. The National Assembly should reject the N91.03billion request for kerosene subsidy inserted in the 2015 budget already before it for consideration.
Recently, domestic airlines cried out for a reduction in the cost of aviation fuel, which they said accounted for over 20 per cent of their costs. The marketers and PPPRA have not responded. But, in Australia, domestic carriers have slashed air fares by as much as 50 per cent to reflect lower jet fuel prices. The International Air Travel Association estimates that a $1 decline in the per barrel price of jet fuel will increase global industry profit by $1.7 billion. Airline stocks have since been rising in key stock markets on the back of lower fuel prices.
The PPPRA and the Petroleum Ministry should not stay aloof. Deregulation of prices does not mean a total abandonment of the people and no government completely abdicates responsibility for pricing to the whims of the market. In the United States and Europe, government moderates prices through taxes. President Goodluck Jonathan should remember that diesel and LPFO are crucial to industry and that the cost of providing alternative power still adds 40 per cent to the cost of production, making our manufactured products uncompetitive, and prompting job losses.
The Nigerian government is still very deficient in communication skills, perhaps because, unlike officials elsewhere, concern for the welfare of the people is simply lacking. This explains why responses to suggestions and the clamour for price reductions have been met more with imperious put-downs than by serious engagement with the public. This was evident in the Op Ed response of the Minister of Finance, Ngozi Okonjo-Iweala, to Governor Babatunde Fashola’s observation that government should help cushion the people’s adversity by looking at how to crash the prices of diesel and kerosene.
Instead of talking down to critics and suggestions, Okonjo-Iweala, as the Coordinating Minister for the Economy, should admit that she and Jonathan have failed to end the country’s self-destructive dependence on imported refined petroleum products even while it produces 2.2 million barrels of crude per day. Debates on appropriate domestic prices and the entire money-guzzling, graft-ridden apparatus of price management represented by the PPPRA and the Petroleum Equalisation Fund would have been unnecessary if we had been refining crude locally to meet demand.
Jonathan and the Petroleum Resources Minister, Diezani Alison-Madueke, should get the PPPRA to nudge marketers into passing on the crude price reduction to Nigerians through reduced pump prices for industry to flourish. With unemployment at almost 24 per cent and employers down-sizing as exchange rates, lending rates and the capital markets spin in turmoil, the government should be concerned about saving jobs. Lower prices for petroleum products will ease some of the pressure on business and households and relieve poverty.