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Forex: Oil marketers disagree on  price hikes, explain why government should ‘relax subsidy removal’

*Fuel marketers have advised the Federal Government to ‘as a matter of urgency, relax the removal of subsidy for a while’, since Foreign Exchange (Forex) largely determines costs of petroleum products in Nigeria, and oil dealers are not willing to import products as of now

Isola Moses | ConsumerConnect

Nigerian oil marketers Tuesday, August 25, 2023, urged President Bola Ahmed Tinubu to gradually relax the removal of subsidy on the Premium Motor Spirit (PMS), otherwise called petrol, citing the inability of several fuel importers to access US Dollars with a negative effect on their businesses.

ConsumerConnect reports President Tinubu Tuesday declared that there would not be petrol price hike and reversal of fuel subsidy in regard to the hardships consumers are currently faced with in the economy.

President Bola Ahmed Tinubu, GCFR

Ajuri Ngelale, Special Adviser (SA)to the President on Media and Publicity, told State House Correspondents that daily consumption of fuel has dropped from 67million litres to 46million litres, following the removal of subsidy.

Labour’s threat of ‘indefinite strike’ premature, says Presidency

Ngelale noted the President Tuesday morning urged stakeholders in the country to hold their peace, adding that the threats of an indefinite strike by the Organised Labour is “premature”.

The media aide stated: “The President wishes first to state that it is incumbent upon all stakeholders in the country to hold their peace.

“We have heard very recently from the organised labour movement in the country with respect to their most recent threat.

“We believe that the threat was premature and that there is a need on all sides to ensure that fact finding and diligence is done on what the current state of the downstream and midstream petroleum industry is before any threats or conclusions are arrived at or issued.

Ngelale further said, “Mr. President, wishes to assure Nigerians following the announcement by the NNPC Limited …., that there will be no increase in the pump price of Petroleum Motor Spirit anywhere in the country.

US Dollars vs. Nigerian Naira

“We repeat, the President affirms that there will be no increase in the pump price of petroleum motor spirit.”

Why oil marketers disagree with Presidency, NNPCL on measures -IPMAN

The oil marketers, however, encouraged the President to learn from Kenya.

According to them, the North African country had to return subsidy on petrol to curb the devastating impact of its removal on Kenyan consumers.

Mohammed Shuaibu, Secretary, Independent Petroleum Marketers Association of Nigeria (IPMAN) Abuja-Suleja, told The Punch: “Let them not do the needful, they will see the consequences.

“We learned this morning that Kenya, which equally removed subsidy and noticed that its effect was so hard on the citizens, has again resumed the subsidy regime for the period of two months.”

Shuaibu also asserted that “government is about the people and it must have a listening ear.

“For Nigeria, how can we be an oil-producing nation with four refineries and all of them are down. We now depend on imports.

“When he (Tinubu) announced that thing (subsidy removal), we said it was going to bring problems.”

The IPMAN Abuja-Suleja Secretary further said: “Are we not feeling the consequences of that announcement now? It is Forex that largely determines the cost of petroleum products here.

“Marketers are not willing to import products again,  So, if the government is going to relax the removal of subsidy for a while, it should better do that as a matter of urgency.”

Fuel price will increase within weeks, unless…. -Marketers

As the Forex scarcity persists in the economy, Shuaibu as well contended that despite the the Nigerian National Petroleum Company Limited’s (NNPCL) earlier  announcement that it had no intention of increasing petrol price, the cost of the commodity would rise above its current “regulated N617/litre” in weeks, if the exchange rate continues to increase.

The IPMAN scribe said: “Relaxing subsidy removal is going to be a very wise decision right now, because going by the price of the Dollar, the cost of petrol is bound to rise.

“In fact, some oil marketers are ready to join the labour union to protest.”

This is because some dealers had said subsidy on petrol would gradually creep in, should the NNPCL continue to sell at N617/litre, particularly if the rise in forex rate persists, according to report.

Similarly, Chief Chinedu Ukadike, National Public Relations Officer (PRO) of IPMAN, had earlier said that outright removal of subsidy would cause severe hardships for Nigerians.

Ukadike reportedly stated: “I’ve been saying this even before subsidy on petrol was removed. How can you stop subsidy without anything on ground as palliatives?

“Trips that used to be N5,000 in the past and now over N15,000. Businesses are shutting down.

“The suffering is rising. The government has to intervene now.”

The IPMAN PRO also explained that the price of imported commodities, including petrol, would continue to rise as far as the rate of exchange of the Dollar increases in the Forex market.

He noted: “Once there is a slack in the Naira against the Dollar, there is going to be an effect.

“The demand and supply of forex is a key factor. We should also understand that it is not only petroleum products that use forex.

Meanwhile, as a way out of the perennial Forex scarcity cum fuel scarcity, the Nigeria Extractive Industries Transparency Initiative (NEITI) has advised the Federal Government to initiate and implement a deliberate policy that would attract investors to invest and help in fixing Nigeria’s ailing oil refineries.

In its policy advisory for the oil sector of the Nigerian economy, NEITI also urged the Government to come up with a deliberate policy to encourage private investments in refineries.

The organisation further stated: “A deliberate policy initiative should be implemented with full Presidential backing to encourage Nigerians and foreign investors already awarded licences to establish private refineries” in the West African country.

It also recommended “the incentives may include tax holidays, institutional support, and availing potential investors in the downstream sector of the available opportunities within the existing ‘Federal Government ease of doing business policy.’ “

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