With the recent slump in global crude, oil price shock and the pandemic outbreak of COVID-19, induce economic lockdown impact on the masses. The Nigerian Government has gifted her citizenry increase in PMS (Petrol Motor Spirit) Price from N145 to N151.56/litre, but in reality fuel is been sold majorly between N161 to N170/litre in filling stations across the nation.
This news didn’t come as a surprise to many analyst and economist going by the prevailing circumstance around crude and primary commodities price falls and depression triggered by world economy uncertainties. Even with the trajectory eyes on the storm of recession hovering over us. The news also came on the heels of the fraudulent and cosmetics monthly PMS Price fixing regime and deregulation of the oil sector by Petroleum Products Pricing Regulatory Agency (PPPRA) in the last three months.
Let rewind back to March, 2020 when the Federal Government, through the PPPRA, announced a new fuel price regime. First, was the reduction price regime from N145 to N125/litre that came into effect on March 19, 2020. Followed is government’s approval of adjustment of N121.50 to N123.50 per litre PMS. Then, followed again, was the N141.80 to N143.80 per litre of petrol, adjustment in June, 2020.
Secondly, then came the Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), Abdulkadir Saidu, who said “Going forward, pricing of the PMS will reflect market fundamentals in a circular dated Wednesday, July 1, 2020, to oil marketers, with PMS pump price increase from N143.80 to N145 /litre, Saidu noted that the essence of “the price band was to ensure price efficiency that would be beneficial to both consumers and oil marketers. PPPRA will continue to monitor price trends and advise monthly guiding price for all petroleum products, based on prevailing market realities and other pricing fundamentals,” he stated.
Saidu further explained that the recent plunge in oil price occasioned by the outbreak of COVID-19 and slowing global oil demand had a direct bearing on the EOMP of petrol, pushing it to a level below the pump price cap of N145/litre. He however concludes that “Nigerians should be ready to pay high or low prices for petrol following the price liberalization scheme currently in place and what we have in place is a market reflective pricing system”
Earlier in the year also on May 15, 2020, a statement credited to the Minister of State for Petroleum Resources, Timipre Sylva, who said deregulation was approved on March 19 this year. Adding that “But as you all know, PMS (Premium Motor Spirit) and other petroleum products are very strategic commodities, so you cannot allow the prices of these commodities to be determined wholly by the marketers,” he stated.
Sylva further said that “deregulation meant that the government would no longer continue to be the main supplier of petroleum products, but would encourage the private sector to take over the role of supplier of the products”. Officially, as we all know since 2017, the NNPC is the monopoly sole importer of petrol into the country after private oil marketers stopped importing due to crude price fluctuations globally, while the PPPRA retains the unjust price template.
Thirdly, then came, the bombshell, provocative and dooms day statement by the Minister of State for Petroleum Resources, Timipre Sylva which rightly observed by saying, fuel subsidy “benefiting in large part are the rich, rather than the poor and ordinary Nigerians.” The government decided to rid itself of the burden by the removal of the subsidy on petrol pump price was abundantly and categorically clear in affirmatively this month of September, 2020 with PMS Price from N145 to N151/litre.
He, however, noted that efforts were being made to develop alternative fuels to the PMS by deepening the utilization of Liquefied Petroleum Gas/Compressed Natural Gas as auto gas in Nigeria. From, aforementioned, it stands to reason that here is the glaringly contradiction, that would be creating controversy and confusion, soon the “market fundamentals”.
The purview and crux of this piece is to x-ray the genuity and ingenuity of market fundamentals that the government as so much put it hopes on to drive the pump price of PMS in Nigeria. “Accordingly, price will naturally be adjusted to reflect a true picture of market fundamentals at any particular period, high or low” The question is how true the above statement, we knowing fully well that the so called market fundamentals is hinge on supply and demand, hancour on the invisible hand of market forces, embellish in profit maximization drive of global capitalism.
In as much as government decide to bite the bullet so as to put in place a more transparent pricing model, stimulate investment growth in the sector and encourage resumption of product imports by oil marketing companies. Regrettably, with the shambles and rots in the downstream sector of Nigeria’s oil and gas industry, government throwing the sector up into the risky and uncertainty space and manipulative tendency of market fundamentals live us with concern. One great pitfall of market fundamentals is it poor scientific outlook and dangers it will pose to our economy.
The petroleum products marketers in this realm would be market fundamentalist. To this end we are confronted with the following questions: Will the market fundamentalist not exploit consumers with arbitrary pricing and round tripling of PMS? Would the market fundamentalist not create artificial scarcity of PMS? Will the market fundamentalist not put pressure on the naira? Will the market fundamentalist not join forces with forex speculator to sabotage, distort and deflect our foreign reserve? How would the uncertainty challenges of accessing foreign exchange be address?
The way forward, if the government is serious about the deregulation of the sector, is not surrendering PMS Price to market fundamentals that are predicated on free market capitalist economy principles not devoid of rooted sharp practices and market manipulation. Secondly, repositioning the sector is to attract the much-needed investments in functioning refineries and pipelines transport construction in the country with incentives for investors in that sectors. Thirdly, the government should also avoid creating a situation where the market fundamentalist in the PMS importation become a nightmare to CBN tired less and painstainking efforts to keep the naira stability jeopardized by the market fundamentalist cowboys. Lastly, we expect healthy competition among marketers that would enhance value for consumers without monopolistic structure that market fundamentals normally bring on, to kill vibrant and competitive market, a cyclical feature of free market economy. In conclusion, we must say here that market fundamentalist are primitive accumulator and maximum profit minded.
By: Adefolarin A. Olamilekan
Political Economist & Development Researcher
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