COMMODITY MARKET UPDATE! FEDERAL GOVERNMENT SET TO INCREASE PUMP PRICE.
Early last week, the information about the Federal government approving an increase in the pump price of Premium Petrol Spirit (PMS) popularly known as petrol was all round social media platforms. Individuals, firms are concerned if this is true or not.
In the last quarter of 2018, Former Governor of Ekiti state, Mr Ayodele Fayose announced that the Federal government seeks to increase the price of petrol from N145 per litre to N185 in March. Fortunately, the price of petrol wasn’t increased. However, in the words of former Governor Fayose, “They are delaying the increment till March because of its effects on the February 2019 elections”. Individuals paid little or no attention to this as they felt it was a thing of political interest but with the news coming up again, individuals and firm are a little bit tensed because of its effect on them.
However, the Minister of State for Petroleum Resources, Dr Emmanuel Ibe Kachikwu, in an interaction with reporters on Monday 15th of April, 2018 in Lagos at the ongoing two-day and second edition of the Annual International Conference and Exhibition of the Oil and Gas Trainers Association of Nigeria (OGTAN) said that the Federal Government has no plans to increase the pump price of petrol, adding that the queues at filling stations was not as a result of shortage in supply of fuel but as a result of logistics issues. He therefore urged the public to ignore rumours of planned upward review of pump price of petrol.
The Government Vs the Citizens… Who tend to benefit more?
The landing cost of petrol is N204 and the approved pump price is N145 per litre, that means the government pays the subsidy for every litre bought. An average citizen will of course, feel it’s his or her right since government have their various ways of collecting revenue from them. For example, through tax. However, the tax rate hasn’t been increased but the landing price of petrol was increased due to the price hike in crude oil internationally. With the pump price remaining constant and landing price increasing, even with the same level of income received by government, One can feel that the rumour about an increase in the pump price might be true.
Individuals also feel it will be unfair to them. The transmission mechanism of an increase in the fuel price will affect the whole economy. Past periods when we’ve experienced something similar, even a farmer will increase the price of her vegetable and when asked, the popular response is that ‘fuel is now expensive.’ Many wonder how it correlates.
Funny enough, it correlates. With an increase in pump prices, commercial vehicles will increase transportation fares. Imagine a farmer who boards a vehicle down to her farm now paying a higher price for transportation will share this burden of an increase on the goods she’d sell. This goes for almost all sectors of the economy as we will experience a general rise in the prices of goods and services-INFLATION
Sadly, fixed income earners will be greatly affected since they will still be paid salary which will compete for fewer goods. This will affect the standard of living of most individuals.
Since there is an expectation in the future rise in the price of petroleum, households will try their possible best to acquire and store a reasonable amount of fuel when it’s still at N145 so as to beat the increment. Also, we will probably have a black market since it is a time to make profit. Fuel stations might limit their sales so as to have enough to sell at the increased amount as a producers’ aim is to maximize profit. On a more general note, there might be a fuel scarcity.
It is quite hard to believe that the Federal Government has no plan on increasing the fuel pump price as there was a hike in the prices of diesel and a general hike in crude oil global market but many Nigerians hopes and believe that the increase in the fuel price will remain a rumour.
By Oladele Abigail
Oladele Abigail, an economics student of Bowen University who applies her passion for writing to her career path.
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