Friday, January 05, 2018 3.20PM / Proshare WebTV
December, 2017 fuel crisis across Nigeria, was unprecedented as it took
its toll on the nation with long fuel queues, increase in
transportation costs and the reality that many had to spend the holiday
looking for the “Petroleum Motor Spirit”, also known as fuel.
occurred at a period Nigeria was experiencing a remarkable surge in
crude oil price (currently above $60 per barrel) and stable production
in the oil-rich Niger-Delta zone.
rise in crude oil price increased the receipts for Nigeria, boosting
the revenue base of the country across the Federal, State and Local
Muhammadu Buhari in his new year broadcast decried the fact that
certain elements were bent of inflicting hardship on Nigerians, through
the fuel crisis and promised to address the issue from the roots.
provide a pathway to solving the perennial fuel crisis, the Senate
Committee on Petroleum Resources hosted key stakeholders in the
industry, to discuss and agree on a strategy that will tackle the
of State for Petroleum Resources Dr Emmanuel Ibe Kachikwu first started
by debunking claims that the Federal Government was planning to hike
the PMS price in the country.
addressing the fuel crisis, Kachikwu highlighted that the major
challenge was the disparity between the landing cost of N171 and the
actual pump price of N145, which according to him was not sustainable to
the petroleum marketers.
proposed two options, first an agreed Forex window with the Central
Bank of Nigeria for the marketers and Second a “Plural” price approach
which will see the state oil company the Nigerian National Petroleum
Corporation retain the N145 price, while marketers sell at a different
This is an 18-month proposal that will be carefully looked to explore the best case for the market.
In view of the two models, here are the matters arising;
forex approach with the support of the Central Bank of Nigeria for the
downstream sector, if adopted as a model will widen the gap between the
official and the parallel market. It will put also exert pressure on
the nation’s foreign reserve which is about $38bl.
Plural Price Approach
the Plural price approach which the Minister of State, Petroleum
Resources said is “theoretical” is adopted it will not exert any further
pressure on the foreign reserves. It will create a fragmentation in the
PMS price, making inflation in the country more volatile.
is pertinent to note that the 18-month Emergency Period to Address
Pricing beginning from January, 2018 will elapse on the month of August,
2019. This is an indication that considering the pre-election year,
political consideration may have come to play over market consideration.
increment in the pump price in the country this year will spike the
price of commodities, increase transportation cost and in overall
adversely impact the socio-economic landscape, which will erode the
confidence in the All Progressive Congress Ruling 12 months to the
the back of this ongoing development, the option is either a widening
in deficit in the 2018 budget, or a reduction in capital expenditure in
attempt to stick to the initial quantitative budget value of N8.6trl.
Nigerian government and stakeholders must give top priority to
revamping the moribund refineries in the country and encourage the new
refinery projects, that are currently being embarked upon.
is unfortunate that one of the leading oil producers in the globe,
cannot meet its domestic consumption, with regards to PMS and Aviation
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