20 Jan 2015

Mixed reactions trail reduction of petrol price

Discordant tunes have trailed the federal government’s decision to slash the official price of petrol from N97 a litre to N87 a litre, with the ruling Peoples Democratic Party (PDP) hailing the directive, All Progressives Congress (APC) accusing the government of deception.

During an interactive session with journalists on Monday, the National Publicity Secretary of PDP, Olisa Metuh, dismissed critics who alleged that the government’s decision to slash the price of petrol by N10 was politically motivated, arguing that it was predicated on the reality of the international price of oil which has fallen by almost 60 per cent since June last year.


According to Metuh, “This is not the first time that we have had a fuel price reduction in this country. You will recall that the late President Umaru Yar’Adua reduced the pump price from N75 to N66. And it was sold at N66 for a very long time.

“That was not politics. He did it in June 2007 and there was no election around the corner. In this particular instance, oil prices crashed and the government and Minister of Petroleum decided that owing to the lower price of crude oil, there will be a reduction of fuel in Nigeria.

“It has nothing to do with the election. If the price remains where it is, there is no justification for any increase. So what Nigerians should be asking for now is complete deregulation of the industry so that it will be reflective of the world price.”
On its part, APC said day that the pump price of a litre of petrol should not exceed N70.

The party also accused the federal government of deception by its so-called fuel price reduction, saying a 10.3 per cent slash in the price of petrol was tokenism at a time the price of crude oil had crashed by about 60 per cent.

In a statement by its National Publicity Secretary, Alhaji Lai Mohammed, the party said the pump price of a litre of fuel should not be more than N70, adding that the government was forcing Nigerians to subsidise the massive corruption in the oil sector by N17 for every litre of fuel.

“When crude oil was selling at $100 per barrel, the landing cost of PMS without subsidy was N125 a litre. Now that the oil price has crashed to about $44 per barrel (sic), the landing cost without subsidy is about N65 per litre.

“The same goes for diesel which should not sell for more than N90 per litre,” it said.
APC noted that while governments of countries, which are not as economically endowed as Nigeria had reduced the pump price of fuel as far back as early January 2015, Nigeria which is the world’s sixth largest producer of oil, is just announcing a price slash that is far below those countries.
“Early this year, Zambia slashed the price of petrol by 23 per cent while Tanzania reduced the pump price of the product by 16%. In the US, which until recently was importing crude oil from Nigeria, the price of fuel has fallen for 113 consecutive days as of January 16.

“Therefore, the 10.3% price slash in Nigeria is too meagre, too late,” the party said.
It blamed the government’s delay in slashing the price of imported petroleum products following the crash in crude oil prices on massive corruption in the oil sector and lack of political will on the part of the country's leadership.
“With Nigeria depending on importation of petroleum products to meet about 90% of its domestic consumption, the country is relying heavily on term contracts entered into with petroleum product trading companies to meet its domestic demand.

“It is possible that the petroleum products pricing formulas embedded in these contracts, which generally run for up to one-and-a-half years and in some cases two years, have not anticipated these low prices.

“Therefore, unless the government moves to renegotiate the contracts now, it may not reap the full benefits of the decline in petroleum prices. But here is the catch: Since the government and its agents have skimmed off huge ‘commissions’ from the firms with which the term contracts were signed, it could not possibly go back and renegotiate those contracts or go into new forward contracts that will reflect the current reduction in crude oil prices.

“It takes a strong willed, determined and transparent leadership to immediately call in the petroleum products contracts for re-negotiations, as this will represent a huge blow on corruption in the sector since clearly ‘commissions’ would have been paid by petroleum product traders on the existing contracts.

“This explains the token reduction in the fuel price, which the government must have hoped will fool an unsuspecting public, especially a few weeks to elections,” APC said.
Credit: ThisDay
 
In as much as the reduction looks like a 'greek gift', Nigerians and opposition parties need to commend the government. 

Additionally, kerosene and diesel price needs reduction as well.

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