Petrol Price Increase Should Not Be Basis For Palliatives – Kachikwu

May 20, 2016 9News Nigeria Breaking News, Hot News, Nigerian economy 0

[Channels Television]

The Minister of State for Petroleum, Mr Ibe Kachikwu says the lifting of petrol price should not be the basis for which government will provide palliatives to its citizens.

Mr Kachikwu was speaking on Channels Television’s Sunrise Daily on Thursday, where he defended the change in pump price for Premium Motor Spirit, PMS by the federal government from N86.50k to N145.

The Minister stressed that no marketer has been told the amount to sell its product, but that the Nigerian National Petroleum Corporation (NNPC) will be hoping to sell at 135 Naira per litre.

“As we go into the hinterlands, NNPC stations will be hoping to head towards more of 135 Naira than the 145 Naira band.

“How did we come to the price of 145? It’s a simple conversion of using foreign exchange at 285. That 285 is from nowhere, it is basically the secondary source that people buy FX from versus the 320 which is black market.

“If you convert it and throw it in you will get about 141, 142 or 143. So there isn’t much of palliative elements left there for you to use. It is simply, ‘go out, find your product, your cost is covered, there is an opportunity for your efficiency to make money, come and deliver’.

“It is not the lifting of petroleum pricing that should be the basis in which government provides a palliative, government has a responsibility to provide social palliatives in an ordinary course of running the day to day administration of a government and they are doing that.

“If you look at 2016 budget, there are loads of such palliatives,” he said.

 Full or Partial Deregulation

The Minister would not state if the latest move by the Nigerian government is full or partial deregulation. He said, “I try not to get into the semantics of deregulation or no deregulation but the reality is that we are liberalizing, we are freeing up the economy, and we are freeing up the business.

“The ultimate of what we are headed for is that everybody should be able to do the business, bring in the product.

“I hear people want to have an argument about whether it is full deregulation or partial deregulation but at the end of the day, the objective is what was achieved with diesel or AGO, which is that the government will have less control over the business and individuals will be free to compete so that Nigerians will have the advantage of that competition.

Transition Period

In response to questions regarding why the price of petrol has been capped when same has not been done for the price of diesel, Mr Kachikwu indicated that this could be a temporary situation.

“Because of the sensitivity of PMS, you want to be sure that at the initial stage there are some guidelines in terms of how you do your pricing but ultimately, obviously we will let the market dynamics take place,” he said.

He added, “What we have done is an upper cap, we have not told anyone what price to sell. We expect that the efficiencies will force people to determine their prices,” stressing that the price band of 135 to 145 Naira are “guideline prices”.

“It’s going to depend on how much you find your FX for, how efficient you are, how invested you are through the whole entire chain of the business because if you are invested in the tankage, importation, distribution and the logistics, you have greater efficiency and those will impact your prices.”

The Minister noted that the decision was made with the input of major players in the sector, stressing that this is a “transition period” towards achieving sufficient availability of the product.

Nigerians have also expressed fears that the 145 Naira price cap might give marketers the liberty to sell for far above 200 Naira considering the similar high prices it has been sold since fuel scarcity started across the country.

But the Minister assured Nigerians that the new measure would address this.

“NNPC provided all these products highly subsidized and people took advantage of it, went out and made their own profit margins. But now these individuals are going to start bringing in their own products.

“Even when NNPC sells its own product, it will sell at those prices, so there wouldn’t be opportunity for those short term arbitrages unless those benefits and pricing come from your own skill set, experience and efficiency,” he said.

Labour Kicks 

Meanwhile, the Nigeria Labour Congress (NLC) has said that it will resist what it called unilateral increase in prices of petroleum products by the government, saying “it represents the height of insensitivity and impunity”.

In a statement by the union after a new price band of 145 Naira per litre for Premium Motor Spirit was announced by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, the labour union said the increase was the least one had expected at this point in time.

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