By Sunny Chuba Nwachukwu
Energy consumption in Nigeria, with the current fuel pump price of 168/173 naira per litre, has lots of implications on the nation’s economy. The new tariff which follows has now blown out of the window “Deregulation policy” in the oil sector. It will distort the macroeconomic calculation and financial equation for Nigerians. Already, inflation rate is up at14.3 percent.
Consideration of all the market forces (crude price, exchange rate, efficiency in service delivery, transportation/logistics) that define the investment climate in the industry may not have influenced the fuel pricing, if the federal government had long developed and maintained the needed critical infrastructure in the Downstream for seamless operations. Nigerians wouldn’t be going through these embarrassing ups-and-downs, confusions and very hurting financial burdens placed on most homes and families.
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A lot of energy experts, stakeholders and analysts are discussing this development, making inputs on ways all could work. My take, however it is looked at, requires taking an urgent action, making an aggressive move, with a drastic intervention move by the federal government, to wade into the troubled situation, and get the existing redundant and underperforming local refining facilities in the country fixed for production. The reason being that such funds needed to be expended could only be made available by the government. My humble suggestion for gathering such funds from the same sector, is the presently oil Benchmark excess crude price accruals (the difference from the latest national budget Benchmark of about $30/barrel and the current oil price of about $44/barrel in our daily production output, prudently and transparently accumulated 24/7, for some months, will fetch what to expend and actualize the desired project). Realistically, no private investor or businessman that is targeting making immediate profit, can muster up such humongous sum to embark on the mentioned repairs/maintenance. This issue needs to be aggressively addressed frontally now by this administration.
After which, private operators, who are big time players in the industry (with offer of first right of refusal being given to Nigerians in the hydrocarbon industry), are invited/engaged to manage and quickly buy them off the hands of the government through a transparent competitive bidding.
Looking at it from the economic angle, the masses, the poor Nigerians are the people, at the receiving end. From the years of the petroleum subsidy regime to this moment that the pump price is hiked, those collecting the buck are the poor Nigerians that are daily struggling to make ends meet!
Examining critically the Nigeria’s oil industry, while also looking at the relationship between our local currency exchange rate to the US Dollar and the fuel pump price, every decade, starting from 1970 till date, the pump price in 1970 was 6 kobo/litre, while the exchange rate was 71 kobo/Dollar. In 1980 it was 15 kobo/litre, while the exchange rate per Dollar was at 54 kobo. In 1990 it was 60 kobo/litre, while the corresponding Dollar exchange rate was N8.7. In the year 2000 it was N22/litre, while its corresponding exchange rate stood at N106. In 2010 it was N65/litre, while Dollar rate was at N156; & finally this year 2020 it rose to N170/liter and in a similar vein, its Dollar exchange rate came up to N465.
This analysis is clearly understood from the economic point, in the sense that the foreign exchange rate started tumbling down as a result of the fact that much pressure was being mounted on our foreign reserves due to importations’ trade deficit balance, annually. The second point being that, while this situation remained, our nation again, embarked on massive imports of the refined petroleum products, to be able to meet up with her daily domestic demands from the ’90s; when our 4 local refineries, with a cumulative daily total output capacity of 445,000 barrels of crude started nose-diving to very low capacity performances. This effect was linked to the excuses of poor turn around maintenance of those facilities but, the actual reason for such performance of the existing refining facilities was the endemic corrupt practices going on, which kept running down those gigantic facilities. This act of wickedness was progressively perpetrated until the four local refineries were completely run down and choked to a comatose state! It’s terrible and most unfortunate!
Until we completely repent from our wicked ways, and our fraudulent activities in the downstream local refining operations, to at least become self-sufficient in our daily local consumptions of the white fuels, we shall never recover from this singular economic woe as a nation!
Sunny Chuba Nwachukwu (FICCON, LS)