Striking the right balance in fuel pricing | Punch Newspapers

The acute fuel shortage experienced during the last festive season may have abated but the major issue remains: How best to address the challenge of appropriate fuel price that guarantees adequate supply without much damage to the economy. With the international crude oil price likely to stay above US$50 per barrel in 2018 (thanks to a production cut agreement reached by OPEC/Non-OPEC countries extended to the end of the year) and an official exchange rate of N305 to the dollar, the pump price of fuel will continue to be a contentious issue particularly when juxtaposed against sub-optimal production by the country’s refineries and increasing domestic consumption.

This issue was again at the fore, when the Minister of State for Petroleum Resources, Ibe Kachikwu, appeared before a Joint committee on Petroleum (Downstream) of the Senate and the House of Representatives recently. The minister left no one in doubt that in view of the crude oil price (of about US$67 per barrel) and the official exchange rate of N305 to the dollar, the current petrol price template introduced in May 2016 was no longer sustainable. His explanations led to speculations that plans were afoot to increase the pump price of fuel in order to crowd-in independent marketers as well as free the Nigerian National Petroleum Corporation from bearing the additional cost of N26 per litre, representing the difference between the landing cost of N171 and the current pump price of N145 per litre. Happily, both the minister and the NNPC spokesman, Ndu Ughamadu, have refuted media reports to this effect calming not a few frayed nerves.

There is no question that the country cannot afford another fuel price hike not long after the petrol pump price climbed 68 per cent in 2016 from N86.50 per litre to N145 per litre. Comparing Nigeria with either Saudi Arabia or the United Arab Emirates, two countries that recently increased their fuel prices in response to higher crude oil price, would tantamount to comparing oranges with apples not least because the economic conditions in these countries are by far different from that of Nigeria. The high rate of inflation (and even unemployment) in the country today points to the fact that the economy is still reeling from the effects of the last fuel price hike in 2016

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Striking the right balance in fuel pricing – Punch Newspapers.