Nigeria: Petrol price hike fuels suffering

Several petrol stations in Lagos were crowded as citizens rushed to fill up before the price increase on Tuesday.

The price of petrol in Nigeria soared to N617 ($0.79) on 18 July, following a previous hike from N180 to around N500 per litre after President Bola Tinubu announced the removal of the subsidy on fuel during his inauguration on 29 May.

Labour unions say the action has unleashed “unimaginable and unprecedented hardship” on Nigerian workers and masses, while the government argues it is a critical part of getting the economy back on an even keel.

Petrol subsidy

For decades, Nigerians have enjoyed a subsidy on petrol, making Nigeria one of the cheapest places to buy fuel globally.

Successive governments have frowned at the gaping hole it leaves in the country’s pocket, but attempts to stop the payment met with opposition from labour and civil-society groups.

The state-owned Nigerian National Petroleum Company Limited (NNPCL) said it spent $10bn on petrol subsidies last year; the federal government budget for the entire year was about $40bn.

Ahead of the 2023 presidential election, all the frontrunners promised to do away with the subsidy payments and channel the funds to other initiatives that would better the lives of the citizens.

During his inauguration, Tinubu put a sudden stop to the payments, attracting criticism from opposition parties and civil-society groups for failing to cushion the suffering of poor Nigerians before removing the subsidy.

I think with the way things are going,it’s better to keep paying petrol subsidy and maintain fuel price at 200/litre than remove subsidy and buy fuel at 620/litre.kawai let’s bring back the subsidy regime pls

— Abdulrahman sha’aban (@botee23) July 19, 2023

In response, the government hastily packaged an N8,000 ($10) payment to 12 million poor households across the country for six months, but reversed the move following criticism about its planned implementation.

Suffering citizens

On Nigerian Twitter, “N617”, the new price per litre of petrol, trended for the whole day as people lamented the hardship the rising petrol cost had inflicted on them.

“Immediately [as] I heard about the fuel hike which commenced after NNPC fuel stations adjusted the pump price, I blamed myself for not filling my car tank last week,” John Ebube, a Lagos-based banker, tells The Africa Report.

“Nowadays, motorists buy as little as required. You scarcely hear the sound of generators at night because most households have adjusted to the harsh reality.”

In Kaduna, north-west Nigeria, the petrol price increased from about N200 at the beginning of the year to N540 and now N620.

“The cost of doing poultry business has gone up, even to transport things to the market and farm is a huge outlay,” Simon Paul, a poultry farmer in Kaduna, tells The Africa Report.

This self government is hell bent to bring injury on the citizens. Imagine fuel pump price is N617.00, there is no electricity, this means you must buy fuel to run your gen, fuel your car if you have one. And here they are talking about N8k to cushion effect of fuel sub removal.

— Godknows Jonathan (@GodknowsJonath1) July 19, 2023

“When [chickens] are brooding, electricity from [the power company] is not reliable and we have to rely on generators. This is an example of what people have been battling with.

“Sometimes people use generators in the evening to get the birds to eat because they need proper lighting to feed well so that you can evacuate them. That is a very serious concern,” Paul said.

Speaking to The Africa Report in February, Wale Edun, special adviser to Tinubu on monetary policy, explained that the removal of the subsidy was critical to returning to macro-economic stability for Nigeria.

“Asiwaju Bola Ahmed Tinubu, in his action plan, pointed out that there is revenue to be earned from cutting the fuel subsidy – it’s up to N7trn per annum. The removal of that subsidy is what he promised,” says Edun.

“He has also pointed out that while he’s committed to removing the subsidy, he is committed to providing some sort of cushion for the hardest hit, for the most vulnerable – he’s not just going to leave them behind.”

Committee work

The first fuel price hike since Tinubu’s inauguration on 29 May triggered the labour union to announce a nationwide protest to force the government to reinstate the petrol subsidy. The union called off the protest after an agreement by the government to review a proposal for wage increases for workers.

On 18 July, the Nigeria Labour Congress (NLC) accused the Nigerian government of failure to reciprocate the workers’ goodwill but instead chose to tread the path of dictatorship and seek to further impoverish the people.

The union umbrella organisation said in a statement that the government’s proposed payment of N8,000 to 12m poorest Nigerian households “insults our collective intelligence and makes a mockery of our patience and abiding faith in social dialogue”.

Part of the agreement between the NLC and the government in June was the inauguration of a committee to discuss ways to cushion the effect of the fuel subsidy removal. But the union organisation says the government is stalling the work of the committee.

“We would not want to waste the time of Nigerians, especially workers, on committees that have already been programmed to fail and thus ignored,” the NLC said in the statement by its president, Joe Ajaero.

“We do not want to provide a cover for the government to get away with the hardship it has imposed on the people. We do not want to legitimise impunity.”

Crude oil price

Industry players attributed the latest rise in the petrol price to the rising cost of crude oil on the international market.

Yakubu Suleiman, spokesperson for the Independent Petroleum Marketers Association of Nigeria (IPMAN), says the Russia-Ukraine war played a huge role in the increasing cost.

“We are praying the Russia-Ukraine war will calm down so that vessels can move from the Black Sea to Africa,” Suleiman told Arise TV on Wednesday. “Let us join hands together and pray so that we have a regime where [the cost of] products will be lower than they are now.”

With persistent hike of PMS price which is in line with the total deregulation of the sector and in tandem with the crude oil price, one would expect that the FG would immediately put in place an energy security policy that’ll go beyond just having supply stock for 30 days. 1/3

— Ken Uttih🕊 (@KenUttih) July 19, 2023

Mele Kyari, the managing director of the state-owned NNPCL, dismissed fears of a petrol shortage, saying the country has a stockpile of petrol that could last more than 32 days.

“This is the meaning of making sure that the market regulates itself so that prices will go up and sometimes they will come down. But there will be stability of supply,” Kyari told journalists.

“Market forces have started to play, people have started having confidence in the market and the private sector is importing products, but there is no way they can recover costs if they cannot take market-reflective costs.”

As of July 2023, 56 marketing companies had applied for and obtained licences to import refined petroleum into Nigeria, according to Farouk Ahmed, the chief executive officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA)

“Out of those, 10 have indicated to start supply within the third quarter, which is July, August, September. Already we’ve received cargo from some of these marketers,” Ahmed told journalists.

“So this is just an encouragement to see that the market is liberated and everyone is free to import so long as you are working within the framework, especially in terms of quality.

“We are not going to put a cap on the price because we are not an importing company, we are just a regulator. The crude price drives the product price.”