By Moses E. Ochonu
Now that one has had time to digest the announcement of a
massive increase in petrol price, one should enter a few comments. The
astronomical hike has nothing to do with the “cost of production” argument we
have become accustomed to hearing. There is some cost involved in refining
crude oil abroad and transporting it to Nigeria
With the price of crude inching up
slightly in the last few weeks, it should add no more than a few nairas to the
price if indeed we want to let market fluctuations modulate the pump price.
This increase has everything to do with government’s last ditch effort to end
the scarcity, which is caused by the inability of fuel importers to secure
foreign exchange, a problem that was in turn caused by the government’s rigid
restrictions on access to foreign exchange.
It was unrealistic to expect fuel
importers without access to Forex at the official rate to continue to import
fuel with Forex sourced from the parallel market ($1=N320) and then sell the
same fuel at N86. They would have lost money. The Forex policy was a
disincentive to fuel importation business and many importers simply stopped
importing, especially since the government announced that it would no longer
pay subsidy; subsidy being the difference between the total cost of importing
fuel plus a small profit margin and the pump price. Now, with the deregulated
regime, fuel importers can source Forex from the parallel market, import fuel,
and sell at a price that would allow them to recoup their cost and make a small
margin.
In other words, the government
wittingly or unwittingly created a problem, which caused many fuel importers to
quit the business, and the same government is now deregulating the sector fully
so that it does not have to (1) pay subsidy, and (2) subsidise Forex for fuel
importers. The government also desperately wants to end the fuel scarcity,
which has eroded its political goodwill. In plain language, the government
wants to kill three birds with one stone.
Another appropriate proverbial metaphor is that the
government wants to eat its cake and have it too. It wants to subsidise neither
Forex nor the difference between the cost of fuel importation and the pump
price, but at the same time it wants fuel to become widely available. The
government wants to transfer the burden of solving a fuel scarcity problem
caused by its Forex restriction policy to Nigerians. The government is throwing
Nigerians to the jaws of fuel marketers in the hope that, as long as fuel
becomes widely available through improved supply, Nigerians will forgive the
insensitivity of the policy, especially since this will also mean the end of
the fraudulent subsidy regime that Nigerians universally despise.
