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Reduction in pump price: Half a loaf is worse than no bread

By Josef Omorotionmwan

TODAY, we shall attempt to follow petrol on its journey from 6 kobo to N97 per litre – from General Yakubu Gowon to President Goodluck Jonathan. It has been a journey in which the Federal Government has always portrayed fuel price hikes as the panacea to every problem in the economy.

We are told that whatever goes up must come down. But increase in the pump price of our petroleum products has remained deaf to this: once the journey starts, there is no coming down. And funny enough, the increases are invariably predicated on increases in the cost of crude oil.

On occasions, though, the cost of crude plummeted but the pump price of the products still remained at their giddy heights. None of the infinitesimal reductions in pump prices ever came without a big fight between our Labour Unions and the Federal Government.

The history of fuel price increases dates back to the administration of Gowon, which in 1973, increased the price by 40%, from 6 kobo to 8.45 kobo.

The Olusegun Obasanjo administration remains guilty as charged: That regime was the first to increase the pump price of petrol by 70% in 1978, from 9 kobo to 15.30 kobo per litre, as a Military Head of State. As a civilian President, Obasanjo increased prices six times and he had cause to climb down only once in 2000!

NNPC Mega Filling Station now selling at N138 per litre in Abuja yesterday.
NNPC Mega Filling Station now selling at N138 per litre in Abuja yesterday.

The Sanni Abacha regime was not any better. Abacha was the only President in the country to force  an increase of 362% down our throats, in 1994, from N3.25 to N15, which two days later had a slight reduction to N11 after a very severe pressure from the Labour Unions.

History will continue to smile at the late President Musa Yar’ Adua who, less than one month after assuming office, reduced the price from N75 to N65 in June 2007. He maintained that price throughout his stay in office.

On  January1, 2012, President Jonathan gave the country what goes down in history as the worst New Year gift ever when pump price was increased by 120%, bringing it to N140 per litre. It took the Occupy Nigeria Movement to force the price down to N97.

It cannot be said that the Federal Government has not been sufficiently warned on the danger in over-reliance on a mono-economy. Before the advent of the oil boom in the 70s, the nation’s economy was largely dependent on revenue from agriculture.

At a point, Nigeria’s palm oil seedlings were adjudged the best in the world and that was when Malaysia came to Nigeria to collect our oil palm seedlings but today, the various agricultural edifices for which Nigeria was known have gone into oblivion – the groundnut pyramid of the North; the cocoa, rubber and timber of the West; and the palm produce of the East, the revenue sources that financed our budgets, have all been consigned to history.

All the same, any nation that quickly harps on the increase of crude oil to hike the pump price of refined petroleum products but becomes reluctant to bring down the pump price of the same refined products when the price of crude oil falls, is at best, insensitive to the plight of the citizenry. This is where Nigeria does violence to mathematics and logic.

Mathematics can be very interesting but it becomes difficult when we attempt to twist it to illogical ends. For instance, if we agree with the Federal Government that the pump price of N97 per litre was arrived at when the price of crude oil rose to $140 per barrel, the Federal Government should, in all conscience, agree with us that now that the price of crude has fallen to $55 per barrel, the pump price should fall to N38.10 per litre. At a roundtable, N38 and N97 could form the basis for a lasting negotiation.

On the debit side, this immediately exposes the Federal Government  to its dubiety over the years. The Federal government will soon argue that the budget estimates currently lying before the National Assembly cannot be financed on N38.10. That is o ut of the question. After all, the Federal Government has already made its money from the sale of crude. As soon as the crude oil came out of the ground, Federal Government sold 90% and it is just the remaining 10% left for refining for our local use that brings all the problems. Having made their money from the sale of crude, some oil-producing countries are able to  refine the 10% and issue same free to their citizens.

The Federal Government is clever by half. The reduction of N10 per litre, which is directed only at petrol, came too little, too late. This is benign tokenism! And this is where half a loaf is worse than no bread. What happens to kerosene, diesel, gas and other petroleum products? Other countries have made reductions across board instead of restricting their reductions to only petrol.

In Nigeria, it took the strike of the oil workers to force the Federal Government to embark on this token reduction. India started reducing its prices from midnight of 14/15 August 2014. Ghana started in November 2014. Kenya, South Africa, Zambia and Tanzania have since announced substantial cuts in pump prices. In all these cases, the insistence is that any reduction that does not translate to substantial reduction in fares and transportation costs is not worth it.

Nigeria cannot continue to play the Ostrich on the issue of fuel prices. For now, the pump price must come down considerably to about N65 per litre. After that, we must do something more definitive by taking a cue from India where the Indian Oil Corporation, IOC, ensures that “prices increase or decrease every fortnight – depending on output cost”. In any case, we do not need any cult of experts to tell us that our return to agriculture is a viable solution to our economic predicaments. There is no better way to give expression to the concomitant austerity measures.


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