Introduction: hike in the pump price of fuel
THE price of premium motor spirit (petrol) has increased successively over the years. In June 2003, this rose from N26 per litre to N40 and this was the third of such increase between 1999 and 2003. This was against the background of earlier increase from N20 to N22 per litre in 2000 as the aftermath of the struggle against the hike by the working people in the country. In 2002, this was again increased to N26 per litre. Diesel and kerosene rose to N26 per litre and later to N38 per litre in 2003 and in 2007 to N70 per litre while in 2012 it was increased to N140 per litre. It sells for N165.77 per litre today under the watch of Muhammadu Buhari as head of state, while the government has given notice to increase the price anytime from now.
It will be recalled that the price of petrol in 1986 stood at 35 kobo per litre, 42 kobo per litre in 1988 and kerosene and gas oil (AGO) were 15 kobo per litre and 35 kobo per litre respectively. In 1990 petrol (PMS) was increased to 60 kobo, kerosene to 40 kobo, gas oil to 50 kobo. All these also increased in the following year 1991 when petrol stood at 70 kobo per litre; kerosene – 50 kobo diesel – 50 kobo. The status quo remained up till October 1993. In November 1993, Shonekan Interim National Government further increased petrol from 70 kobo to N3.25 per litre; kerosene – 50 kobo to N2.75 and diesel – 50 kobo to N3.00 per litre representing 464.28, 550 and 600 percent increase respectively. In 1994, Sanni Abacha led military government increased the price of petrol, kerosene and diesel to N11.00, N6.00 and N8.99 respectively. In the year 1999, before Abdulsallam Abubakar handed over power to a civilian government and this was raised to N18.00, N17.00 and N19.00 for petrol, kerosene and diesel respectively.
There has been a sharp response against the increase by Nigerian people since Obasanjo started such not well thought out policy during his first head of state as a military ruler when he raised the price of petrol from 8 4/5 kobo (January 1966 – 1978) to 15 1/3 kobo in October, 1978. But since these regimes were typical military dictatorship, they care less about the plight of Nigerians. They believed they came to power to rule the country like a conquered territory and they did behave to type. It was for this reason that each successive regime has been giving virtually the same reasons for increasing the price of petroleum products even when such arguments have been defeated.
Table: Pump price of fuel in Nigeria (1981-2022)
Years | Govts in power | Price in Nig. (per litre in N/kobo) | ||
1981 | Shehu Shagari | 0.15 1/3 | ||
1982 | ,, | 0.20 | ||
1983 | ,, | 0.20 | ||
1985 | M. Buhari | 0.20 | ||
1986 | I. Babangida | 0.39 ½ | ||
1987 | ,, | 0.39 ½ | ||
1990 | ,, | 0.60 | ||
1995 | S. Abacha | 11.00 | ||
1999 | Abdusallam | 20.00 | ||
2000 | O. Obasanjo | 22.00 | ||
2002 | ,, | 26.00 | ||
2003 | ,, | 40.00 | ||
2004 | ,, | 50.00/65 | ||
2007 | ,, | 65.00 | ||
2012 | G. Jonathan | 97.00 | ||
2015 | ,, | 87.00 | ||
2016 | M. Buhari | 145.00 | ||
2020 | ,, | 145.00/125.00 | ||
2022 | ,, | 166.00/? | ||
From Table above, the percentage change of petroleum price before SAP period (1986) since 1981 was 33.06 per cent whereas the percentage change thereafter (SAP) up to 2003 was 16,900 per cent.
When we look at the price per litre of petroleum in Nigeria and other OPEC countries, the pump price could said to be at the same level but when other factors like worker’s wage, GNP/capital and the wellbeing of the people are to be considered, it becomes glaringly clear that Nigeria is far behind in benefiting average Nigerians as oil producing country.
Arguments for and against increase in the price of Petroleum Product
The various reasons advanced for increasing the price of petroleum products by the government are the same with that of the successive governments in the past.
Table 10 above shows how price of petroleum products had moved between the year 1981 and 2012.
The need to remove Subsidy
One of the reasons given by the government (led by Olusegun Obasanjo) for increasing the price of petroleum products was that it could not afford to subsidise petroleum, kerosene and other petroleum products because 30 million litres were being consumed per day and that the entire four refineries grounded require to be refurbished and repaired in order to make operational goal achievable such as meeting the internal consumption needed by the people and to export refined oil to earn more revenues for the country The full operational capacity of the refineries is put at 13 million litres of petrol while the balance to be imported to fill the gap of the shortage between the volume of consumption and refined products will amount to 17 million litres. So, the government therefore maintained that it could not afford paying N204 million per day as subsidy. In the estimation of the government it is better to spend such huge total sum of money as N80 billion on developmental projects in such specific areas as education, health, roads, bridges, etc. that would have direct effects on the poor. In justifying this argument further, the defenders of the removal of subsidy argued that the civil servants in the country that constitutes only 5 percent collect overhead expenditures of 85 percent.
In order to counter this argument, the oppositionist civil society groups have argued that there is no subsidy on oil as crude oil is made available to local refineries at the rate of $9.50 and at that marked price, profit is already included above the production cost of crude that is less than $6 per barrel apart from the royalties and petroleum profit tax accruing to the federal government on the crude oil produce.[1] So, subsidy can only said to have taken place when the selling price is lower than the cost price. What the government and NNPC usually referred to as subsidy is opportunity cost i.e. the price the petroleum products would have been offered for sale at the best favourable alternative market elsewhere internationally. The price at which government would have prefer to gain if the same products were to be sold at another market at an optimum or higher price, to enhance higher profits; rather than the price offered for consumption at the local market.
There is also the need to understand the very reason for the big disparity between the price of petrol at the international market and local market. This is largely due to the introduction of SAP in 1986 which was responsible for devaluation and cheapening of the value of Nigeria currency, the Naira at the international market. It will therefore not be correct to expect Nigerians to buy fuel at the same rate it is been sold at international market as this might result to provocation as the effects might be too much for people to bear.
One other reason for such increase in the price of petroleum products at the international market than in domestic market is the subsidy being provided by Nigerian workers especially the oil workers who are being engaged at a very cheap price in comparison with other (oil producing) countries.
Among issues raised by the government was to compare the price of fuel in the neighbouring countries that do not produce oil but where smugglers on taking the advantage of nearness sell at high price than the selling price in Nigeria. It has also been argued that the disparity between the price of petroleum in the country and other neighbouring countries is due to the tax element that such countries place on imported oil as a way of generating revenue from any product passing their borders. By this, smugglers are also at a disadvantage except by the definition of smuggling they are not expected to pass through legal routes and therefore pay no tax. If Nigeria is wise enough, she would have made efforts, in collaboration with the neighbouring governments in the West African sub-region, to establish filling stations that would provide fuel to them at the same price being obtained in Nigeria.
For whatever reason a policy of this nature has never been contemplated how much implemented. It would be difficult to have such policy in place when disparity in price of fuel is being experienced across the country even when a percentage of tax called equalisation tax has been computed to make up the price of oil in order to have one price for selling fuel across the country for the purpose of taking care of the problem of distance and cost of transportation of fuel to faraway places within the country.
The price for sales as approved by OPEC at the international market is the same for all OPEC member countries but there is disparity when it comes to the price at the local market. The two markets cannot be compared because a situation whereby citizens of the oil producing countries cannot enjoy such advantage in buying at a cheaper price will amount to economic alienation. This is a bountiful area in sociology that hinged on how the produce of labour is separated from its producer thereby estranged from the products s/he produces. This is also what is called price discrimination in economics which means two markets for a single product. A case in point is a motor assembly/manufacturing company where cars are produced as a result of the labour output by the workers in a company but at the end of the process many of the workers found it difficult to own a car of theirs because the products no longer belong to them.
It is normal in industrial establishment noted for production of goods for workers to enjoy lower price of their labour. This is to say that there is the need for subsidy and this should be canvassed for by social committed right activists but what we have now that is being touted as subsidy is the subsidy for the rich oil marketers and not for the poor Nigerians.
When one takes into consideration such transactions required to compute the unit price of petrol or this is arrived at per litre? It is obvious that there is always no transparency on how this was arrived at. NLC (as at 2000) argues against how NNPC was involved in the act of double counting in respect of costing the produce. This include such cost items as marketing allowance that was splitted into bridging cost, transports’ margin, dealers’ margin and marketers’ margin. It was by arbitrary computation of such costs that the government arrived at N22 rather than N15 which according to it was the most appropriate price at the time. The cost structure of petroleum products in the year 1994– 1998 as a reference point helps in no small measure to expose the arbitrariness in the cost structure of this product in the year 2000 and thereafter.
The experience of Sanni Abacha led Government is important here. In 1994-1998 it fixed the price of petrol (PMS) per litre at N11 and this include other cost and the profits margin of N5.32k and that was ploughed back to Petroleum Trust Fund that was originally meant to fund uncompleted projects but in practice extended to include welfare programme later that include provision of drugs in the hospitals, maintenance of roads, providing water, etc. Other successive governments have not succeeded along this direction as little or no benefit is derived from the hike in the price of petroleum products imposed by it.
To be continued…
Comrade Olamosu is of the Centre for Social Policy and Labour Research (SOPLAR), Signs and Wonders, Ekotedo Iyalobe, Dugbe, Ibadan. He can be reached via +2348175109802
[1] Special Committee on the review of petroleum supply and distribution – Labour Group Report, 2000, p. 102