•The Federal Government should seek a creative way out of the price conundrum
The call by former Group Managing Directors (GMDs) of the Nigerian National Petroleum Corporation, NNPC, for an upward review of the price of Premium Motor Spirit (petrol), merely indicates how far the nation is from resolving the fuel price conundrum. Aside picking holes with the price cap of N145 per litre which they pointed out as out of sync with current economic realities, the former GMDs also deplored the idea of a price cap as incongruent with the liberalisation policy, particularly with the foreign exchange rate and other price determinants such as crude cost, Nigerian Ports Authority (NPA) charges, among others, remaining uncapped.
Far from being spurious, we must admit that the statement by the former GMDs reflects, in a broad sense, the growing unease with larger developments in the macro-economy, particularly the turbulence of the downstream operations. Notable in this regard is the biting foreign exchange scarcity and the plunge in the value of the naira to its lowest level ever – all of which are directly linked to the slump in global oil prices and the activities of the militants in the Niger Delta that have continued unabated.
If we may recall specifically, the current template, adopted in May, was anchored on the agreed exchange rate of N285 to the United States dollar. Today, the currency sells for N315.25 and N420 in the interbank and the parallel markets, respectively.
The situation, we must also admit, is a Catch-22 situation for the Federal Government. A move in the direction of a hike in petrol price at this time is certainly going to be rejected; the same way that Nigerians would see another punishing round of fuel shortages under whatever guise as a descent to the familiar path of arm-twisting by an insensitive Federal Government. Much as it is hard to see an easy way out given the situation, the onus still lies on the Federal Government to find a creative way to address the problem.
Dispelling the notion of an imminent fuel price hike is, in the circumstance, a good step. Apart from staving off the crisis that would most certainly arise should the Federal Government go ahead with it, it shows the government as being in sync with the national mood.
The real challenge, however, is one of weaning the nation off the cycle of dependency under which it is forced to spend a record 40 percent of its entire forex outlay on fuel import – a development that poses frightening risks to the nation’s macro-economic stability. While much song has been made of the need to liberalise the industry, the reality is that far too little has been done to actually deliver the fruits. The result is the current quagmire over product pricing that is proving to be quicksand.
What Nigerians need at this time is a time table that lays out in concrete terms, specific measures with timelines to get the nation out of the conundrum. Nigerians deserve to know, for instance, the current state of the nation’s four refineries. Has the Turn Around Maintenance (TAM) programme been completed, if not how long will the refineries take to come on board again? What about the plan to hand over some of them to oil majors for management? Is the plan still on course? What about the modular refineries said to have been licensed? How long will the nation still have to wait? Does the Federal Government have a fall back plan should, as many fear could happen – the naira continue on a free fall?
Definite answers to these questions will no doubt go a long way to allay the fears of the citizens about the direction of the industry.