PMB and the Proper Pricing of Petrol

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PMB, Proper Pricing, Petrol

By Bala Ibrahim

The Federal Government has increased the pump price of petrol from N148 to N151.56 per litre, and some people are calling for hell to come loose, or the President should resign because of what they called deceit.

I dont know who is deceiving who. Is it the cynics that are acting with selfish sentiments or the President that is being propelled by patriotism? Except for those of us that have elected to be mentally lazy, the answer to the problem is boldly displayed on the global market billboard.

My article is not only intended to defend the position of the Government for jerking the price of petrol upward, but also meant to justify it, based on what obtains everywhere in the world, and Nigeria cannot afford to be an exception.

A visit to the site of Globalpetrolprices.com would tell you that they are a one-stop-shop on all issues that have to do with the tracking of the retail prices of motor fuel, electricity, and natural gas in over 150 countries. They collect, cross-check and analyse all data, using multiple sources before publication. The data are used by clients and interested parties to stay informed of energy cost across countries and to investigate trends over time. They also monitor changes to taxes and regulations-making, which is why they are considered reputable and reliable, all over the globe.

According to their publication of 31-Aug-2020, “The average price of gasoline around the world is 1.01 U.S. Dollar per liter.” This is about N500 per litre. While they argued there is substantial difference in these prices among countries, due to the various taxes and subsidies for gasoline, all countries have access to the same petroleum prices of international markets. As a general rule, they say, richer countries have higher prices, while poorer countries and the countries that produce and export oil have significantly lower prices.

One notable exception is the U.S. which is an economically advanced country but has low gas prices. No mention is made of Nigeria in the list of countries that are rich in oil, and which is expected to go under the same exception with the US. Why then are we expecting Nigeria under PMB to price it’s petrol differently?

Economists have agreed that the increase in petrol pump prices is always a reflection of the global oil prices. Last month, the crude oil price was around $43 per barrel, so the pump price of petrol was relatively lower. But it rose to about $44-$45 towards the end of the month. By this week, it had increased to $46. Going by the inseparable relationship between crude price and petrol price, it is only natural that the pump price must go up. If along the line, the crude price falls again, petrol prices will crash accordingly.

Like with any commodity, petrol prices are not determined by sentiments, but by the laws of demand and supply, which are the forces that make it susceptible to change. When supply exceeds demand, prices fall, and the reverse happens when demand exceeds supply. No amount of love for, or against the President, can effect a change on those laws. Why then are we expecting Nigeria under PMB, to price it’s petrol differently?

Until recently, the European average gasoline price was 1.36 USD per liter, but with the change in the global price of crude oil, the prices of petrol have increased correspondingly. Gasoline prices went up by 0.1% in Asia, by 0.9% in South America, and by 0.5% in the USA. The most significant price increases were observed in Peru, Argentina, Puerto Rico, Germany, and Jamaica. The largest weekly gasoline price change was observed in Argentina, where the government authorized the first upward adjustment of the retail fuel prices in nine months. Why then are we expecting Nigeria under PMB, to price it’s petrol differently?

In the UK, petrol sells for N700 per litre. In Germany, it sells for N724 per litre. In Saudi Arabia, petrol goes for N202 per litre. South Africa sells it for N428 per litre. China sells it for N277. Kenya, N442, while in the UAE, the price is N230 per litre.

I dont know where those crucifying the Government are getting their economics from, but it’s important to note that the petroleum price of N151 or even N160 per litre obtainable in Nigeria is also the cheapest in the West African sub-region.

In Ghana, petrol sells for N423 per litre. In Benin Republic, the price is N427 per litre. In Niger, the comodity is selling at N455 per litre. In Cameroon, it’s N536 per litre. In Tchad, it’s N465 per litre. For God’s sake, why are we expecting Nigeria under PMB to price its petrol differently?

This price differential, has been identified as the biggest factor responsible for the high smuggling across Nigeria’s borders, as well as being the key factor that is hampering the revenue generation of the country.

Indeed there are areas the Government under PMB needs to work more, in order to cushion the effect of hardship being felt by the people, but in demanding that, and in our determination to hold the government accountable, we must first make ourselves not only reasonable, but robustly responsible.

It is economically irresponsible, to expect Nigeria under PMB, to simply sit down, and change the laws of demand and supply.

Mr Ibrahim writes from Abuja.

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