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.
OUTLOOK
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
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Oladele Abigail, an economics student of Bowen University who applies her passion for writing to her career path.
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I think this issue of possible increase in fuel price is a symptom of a lying fundamental problem… The problem is acute stupidity. The overall diagnosis is lack of wisdom. It’s soo unheard of when as a oil producing nation, we are unable to refine oil and because of that problem, we thought we can solve the problem by importing refined oil. That’s gross error. Who in the world does that except Nigeria. Between 2015 and now, we spent $5.2 trillion on fuel subsidy. A $5.2 trillion that would have gone for education, health and infrastructure if we had a working refinery.
The economic situation of things in this country is false, the fuel price in reality should be N204 since the landing fee is N204. But our economic reality on fuel has been altered, so we think increasing the fuel price would be hell… It is hell already, we’re just patching it up until someday it can’t be patched up as we moving closer now since the country revenue has really dropped, then hell blows up. Then we then face the reality of things, we’ve been living in hell long ago, our government was just air conditioning it.
The way forward is to stop shifting our responsibilities to other countries who then charge us for that responsibility. Education and knowledge may be expensive but Ignorance is much more expensive. You can ask Satan how expensive ignorance is had it been he knew what Jesus came to do on earth. For had they known it, they would not have crucified the Lord of glory.
Building a refinery and operating it may be expensive but having none that’s operating is much more expensive, do you if we had our refinery working, we would spend $5.2 trillion in 4 years operating it?
The Government should stop spending money on unnecessary things, stop this school feeding program and other programs like that. Gather these money together, borrow responsibly if need to, then repair all defunct refineries, build a better one, begin to operate it with the money we’ve gather until we are able to refine the total amount of petroleum we subsidize. Remember the subsidy would be there until this is achieved, when this is B achieved, remove the fuel subsidy and let the price of petrol be determined by the free market. The money we spend on subsidy should go to paying back our debts until our debt profile is very low..
Pending the time the debt will get low, we should opt out of OPEC, its of no use to us, the organization is been controlled by the illiberal theocratic mafia regimes of the Saudis and UAE who only look for their interests only.
In leaving the OPEC, we should increase our refined oil generating capacity and start looking for new markets to trade with starting with supplying the whole of Africa at a lesser rate to that of OPEC to buy off their allegiance to us, begin to supply the South Asian countries also at a lesser rate. This is Business and business is politics, OPEC might be playing the checkers game, we need to pay the long term chess game. Our primary goal should be to displace the Arabs off their markets by making a better irresistible offer.
In doing this simultaneously, we can get the money to reduce debt (I soo much hate debt) 😡 and increasing our oil revenue, we can then pump the excess of these money into education most importantly, health, and infrastructure. And so on and so on… 🤗🤗🤗
Nigeria can be better we our leaders have understanding, knowledge and how to apply smart policies… But as of now, be it Christian or Muslim, the country is deprived of good leadership..
Wow
This is so explanatory and concise
I agree with this argument too, we really need to plan for the future and get our refineries working.. unfortunately our leaders are not ready to do that, that will take a lot of sacrifice and dedication which will most likely not yield results for years to come.
However, we might still experience increment in pump price soon
Hello Sir,
I agree with your point of view.
However, looking at it… One sector will have to suffer for one sector to benefit. For the government to open up a refinery and maintain it.. Some expenses needs to be cut off,like the example you gave,cutting off school feeding program.
Well, I think the ability of the Government to priotize the needs of its people is the main problem and what they should focus more on. Let’s hope that Dangote’s refinery will work out fine and solve out of this problem.
Hmmmm🤔
Good points. But then, I’m of the opinion that Dangote refinery will be of little help to the masses (although this will employ labour).. on the long run, it will only make the rich richer. We have our own refineries, why can’t we put them to work?
The Dangote refinery is a step in the right direction but more needs to be done as fast as possible. The time is going.
Seems you guys now carry news, that really ok, I’ve been expecting this. Nice one
Hi Kola!
It gives me joy that you are anticipating for the progress of My Woven Words.
However, this is not a news update. It’s an economical review of community market whereby Oladele Abigail (who is an economist) analyses commodity market and predicts the possible outcome.
Thanks a million
I find this funny: even a farmer will increase price of vegetables claiming that the price of petrol has increased”
Similarly, I could remember the woman selling akara telling me that her akara is now small because “dollar ti won” (rate of dollar increased)
It might sound funny, but they all affect each other in a way
well done to whoever wrote this
I can still relate with increase in price of petrol affecting farm products but increase in dollar rate has nothing to do with akara, are we importing the beans ni🤷🏽♂️
Hello Kayode.
Thank you for reading through.. I understand the feeling of how the rate of dollar affects Akara… Funny enough, it does.
What if the only source of income for the woman is through the sales of Akara?. Don’t forget, the woman also have other commodities to purchase. These commodities have been indirectly or directly affected by dollar rates… The best thing for the woman is to increase the price of Akara or reduce the quality and size… It’s not really her fault too.
True
I agree with you on this
Hello Dr Adejumo.
Thank you for reading through and commenting.
Both the dollar rates and increase in pump price still has a way of affecting each sector of the economy