The misalignment of the pump price of diesel in the country with current realities of rock bottom oil price in the global market has drawn the ire of members of the organised private sector in the country, prompting a petition to be sent to the federal government to investigate and slash diesel pump price to align with declining international oil price.
The Nigerian Association Of Chambers Of Commerce, Industry, Mines And Agriculture (NACCIMA) representing the organised private sector, wrote the petition to President Muhammadu Buhari, addressing it to the Director General of the Federal Competition and Consumer Protection Council FCCPC, Mr Babatunde Irukera, seeking an investigation into “the excessive price of automotive gas oil (ago)/diesel despite a decline in international crude oil prices.”
NACCIMA, noted that it was the authentic voice of the organized private sector in Nigeria and was responsible for safeguarding the interests of the private sector through constant dialogue with Government.
“It is against this premise that we are presenting this Petition which seeks your intervention against the stagnation in the price of Automotive Gas Oil (AGO), also known as Diesel, despite the significant decline in the price of crude oil in the international market.
“The facts and circumstances upon which our Petition is based are outlined as follows: the sudden spread of Covid-19 has plunged many of the world’s oil production countries into limbo, through closures and general financial uncertainty in China and other major oil and gas consumers. This decline in production has precipitated a near-identical decline in oil prices. Figures from ‘Trading Economics’ (renowned economic forecasters) reveal that the price per barrel of oil has collapsed in the last four months, from a peak of $64.58 on 5 January to a low of $20 on 1 April. This drop has been hastened by two periods of significant declines: a fall from $47.80 to $30.16 between 5 and 9 March, and a fall from $33.33 to $20.23 between the 13 and 18 of March.
“As a result of the drop in crude oil prices and the consequent crash in the landing cost of imported petroleum products, President Muhammadu Buhari on 18th March, 2020 approved the reduction in the pump price of Petroleum Motor Spirit (PMS)/Petrol from N145.00 (One Hundred and Forty-five Naira) to N125.00 (One Hundred and Twenty-five Naira) and accordingly directed the Nigerian National Petroleum Corporation (NNPC) to immediately effect the change with the mandate to respond appropriately to any further oil market developments.
The price reduction, which the President assured was inspired by the need to stabilize the economy and provide relief to ordinary Nigerians, was implemented in line with the Price Modulation Template approved in 2015 which was designed to be cost reflective in line with market dynamics.
NACCIMA however noted that despite the review of PMS/Petrol price, the prices of the other imported petroleum products, particularly AGO/Diesel, have remained unaffected by the developments in the international oil market.
“Our investigations reveal that AGO/Diesel has continued to retail at a pump price as high as N226.50 (Two Hundred and Twenty-Six-naira, Fifty Kobo) in several filling stations across the Country, which is apparently at odds with the market dynamics that should determine pricing at the present time,” NACCIMA said.
According to the Chamber, in Nigeria, AGO/Diesel is a major cost component for the manufacturers and household consumers.
“It is used to power the generators, to bring alive the machinery, computer servers and mobile phone towers that run Nigeria’s economy, and serves as an intermediate input/cost element in production. The change in price invariably affects productivity, competitiveness and profitability. The pump price and availability of AGO/Diesel indeed affects both the micro and macro economy of every nation and Nigeria’s Diesel-dependent economy is no exception.
“In view of the foregoing, we hereby appeal for you to use your good office to urgently investigate the Downstream Sector of the Petroleum Industry in Nigeria to clarify the correlation between the prevailing pump price of AGO/Diesel and the landing cost, with a view to ruling out the possibility that the pricing may be unfavourably skewed against the end-user on the supply chain,” NACCIMA said.
The Chamber added that the intervention of the FCCPC DG will be in harmony with the Commission’s mandate to protect the Nigerian consumer in all spheres and same will equally bring relief to the manufacturers and indeed all consumers who, as attested to by government data, provide at least 14 gigawatts of power annually, which is a significant contribution to the gigawatts of power supplied by the DISCOS on the National electricity grid.
“We are trusting you, Sir, to treat our Petition with the utmost consideration and dispatch,” conclude the petition signed by NACCIMA Director General Amb. Ayoola Olukanni on behalf of the Chamber’s National President, Hajiya Saratu Iya Aliyu.
In his acknowledgement of the petition, the Director General of FCCPC, Irukera, assured the petitioners that the agency analyse, proceed with investigation and make their findings and recommendations known.
Also copied in the petition include Vice President, Professor Yemi Osinbajo; Minister of Industry, Trade and Investment, Otunba Adeniyi Richard Adebayo; Minister of State, Petroleum Resources, Chief Timipre Sylva; Group Managing Director Nigerian National Petroleum Corporation (NNPC), Mr Mele Kolo Kyari and Executive Secretary Petroleum Products Pricing Regulatory Agency (PPPRA), Mr Abdulkadir Umar Saidu.
NATIONAL ECONOMY reports that earlier in March 2020, when the pump price of PMS was reduced by the federal government to reflect the plummeting oil price in the international markets, a reaction from Mr Ambrose Oruche, Acting Director General of Manufacturers Association of Nigeria (MAN), was that the measure considered a palliative by government will not move the needle in terms of reducing the cost of production, as manufacturing firms and industries in the country do not use PMS to power their machines.
“As manufacturers, we do not use PMS, what we use is mainly diesel and gas, that is why we have been calling on the government to reduce the price of gas, so that the cost of production can come down,” he said.
He also pointed out that even on the supply side, the reduction of price in PMS will have very little effect as most vehicles used for delivery and haulage of raw materials were diesel powered.