By Moses Ochonu
The astronomical hike in the price
of petrol announced in Nigeria
With the price of crude
inching up slightly in the last few weeks, it should add no more than a few
naira 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 which was in turn caused by the government's
rigid restrictions on access to forex.
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. It was a disincentive to
fuel importation business and many importers simply stopped importing,
especially since the government announced sometime in February or March that it
would no longer pay subsidy, i.e 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 created a problem of restricting forex, 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)
subsidize forex for fuel
importers.
