There is a general misconception about the new pump price of Petrol.
What the government has done is simply liberalising or unfreezing oil business within the country. It is absolutely an unhealthy economic policy for any government to keep subsidising the true cost of petrol.
With oil prices about $50 per barrel, and our oil production quota reduced to 1.4m barrels per day, Nigeria cannot keep subsidising domestic consumption. It simply won’t work.
There is no money from any other source to offset the ever-rising bills.
The new policy has uncapped the number of companies wishing to import petrol into the country. The regulated pump price of N145 per litre simply states that no marketer of this product is allowed to sell more than N145 per litre, but it can be sold below this price.
I find it hilarious, and complete ignorance on the part of the National Labour Congress (NLC), to have even planned the failed nationwide strike to force pump price lower or remain within status quo. Is it better for Nigerians to line up in queues, all day, only to eventually buy petrol at N250 per litre?
This is time for reality check.
Nigeria is broke, and it’s not President Buhari’s fault. The only fault I can allude to him is the delay in implementing the policy.
The breakeven price of our crude is $65. This is the price at which the selling price equals the cost of production.
Any price below is absolute loss. Currently, on the international market, Crude oil Brent, the benchmark for ours is $49. This is a significant loss to the nation, as we have not even attained the breakeven price of crude produced in the country. In this year’s budget, there is already a deficit of about N2 trillion Naira, which must be sourced to enable full performance of the budget. If the funds are borrowed, which is the most likely source of funding right now, we must find ways to arrange repayment, no matter the tenure of the loan.
Nigeria is not the only country being bashed by the falling oil revenues. Saudi Arabia, Qatar, Venezuela, Kuwait and Bahrain are equally on the forefront of economy downturn. From January 2015 to date, Saudi Arabia’s foreign reserves have depleted from $740 billion to just under $600 billion. Over $140 billion has been burned to meet the Kingdom’s budget deficit. Saudi has one big advantage over Nigeria– population. While we are surging to 180m people, Saudi Arabia’s population is around N23m. Still, the Saudis are being very cautious of missteps.
The countries mentioned above have also recently increased pump price of fuel this week. Reliance on oil alone as the source of foreign currency earner, spells doom for every nation with very few options like Nigeria. Those who cannot understand this simple economics must reach out to more enlightened citizens for proper education. We cannot afford extra luxury anymore.
When the former Central Bank of Nigeria (CBN) governor, Sanusi Lamido Sanusi, warned the nation of the dire consequences of looting the treasury, Goodluck Jonathan, the then President of Nigeria, removed him from office. No one reacted because the People’s Democratic Party (PDP) was in power, ditching out largess from the nation’s treasury. Sanusi’s prediction has manifested and we are ill-prepared for it. One thing is certain: Nigeria will never be the same again; no more easy money for the lazy.
Venezuela has the largest known oil reserves in the world (about 20% of the world’s reserves), yet it is finding it hard to feed her people because of poor economic policy of subsidising everything. Venezuelans now work two days in a week. The rest of the time is spent lining up to buy subsidised essential commodities from government stores.
In Saudi Arabia, the young crown Prince, Mohammed Bin Salman, has ambitiously projected his country’s departure from oil by 2030. The drive to relinquish oil as the main source of revenues is on high- octane throughout the Middle East. Nigeria cannot be left behind in the natural quest to feed herself. Oil will not suffice.
PMB’s aggressive drive to retrieve some of the stolen funds requires every citizen’s support; it is the only immediate source of revenue for now.
Those who looted the nation’s treasury have rendered Nigeria poor, while their families bruise our faces with glaring insults.
There is no other revenue source for this government to accomplish its programmes, if the thieves are not made to cough out as much as possible. Oil remains our greatest nemesis.
Petrodollars is vanishing as other cheaper sources of energy have clearly appeared on the horizon. For us in this country, there are two grave factors:
(1) Nigeria cannot meet its production quota because vandals keep bombing production facilities and pipelines and
(2), oil prices will not recover as soon as we expect. Therefore, the most rational way to steer the economy is to remove subsidies, raise as much funds from other sources, and improve the nation’s infrastructures– while processing diversifications. This is the time to shift our bedrock from oil, and look for other commodities like cocoa, Palm oil and intensive rice and cotton production.
The issues facing Nigeria today are beyond politics. We must first, survive before going into the usual human intrigues of who is right or wrong. The nation has been looted and raped, and it’s time for rational Nigerians to step up and support the government in the fight against corruption that will eventually leave us in perjury, if not curtailed.
The rising opposition to NLC’s irrational reaction to engage in nationwide protest is an indication that, at last, we are wakening up to the realization that unless we pay urgent attention to our demise, the scourge of corruption will swallow everyone.
Every sector of our economy requires urgent attention, but with very little funds in the country’s treasury, the urgency becomes more intense. It is not about President Buhari or the All Progressive Congress (APC), but the survival of the nation.
Those fueling insurgency by bombing oil pipelines will never succeed as more and more Nigerians are becoming aware of the economic hardship that will come. The earlier we shift our focus from oil, the better for us all.
This is the time for economic revival and recovery. It will be a painful experience– more jobs will be lost– and inflation will surge higher. There is no other possible path to redemption but to endure for now, or perish all together.
Another area this government must analyze and act swiftly is the issue of devaluation. Naira, in my opinion, remains over-valued. Devaluation is a must, and there is nothing we can do to improve our foreign exchange earnings for now, but to keep on borrowing or deplete the already meagre foreign reserves.
To meet our internal debts and keep the nation economically active, the adjusted fuel price with removed subsidy is the first rational step. Devaluation or flexible exchange rate (as it now officially called) will reposition our economy in a much better shape. We need to be conscious of what is going on in Venezuela these days.
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