Hikes in petrol, energy prices infuriate impoverished consumers, troubled manufacturers


The recent hikes in petrol and energy price have further demonstrated to Nigerians that their security and wellbeing do not count and that no amount of protests will reverse the decision. Already, Nigeria has been rated as the poverty capital of the world. The country has overtaken India as the world capital for under-five deaths, according to UNICEF. With these latest developments, Nigerians are anxiously waiting for another global classification soon

By Anayo Ezugwu

NIGERIANS have continued to react to the sudden increase in the prices of petrol and electricity tariff. The current increase has jolted citizens – artisans, technicians, teachers, manufacturers, and industrialists, who have described the action as ill-timed, insensitive and a deliberate move to further impoverish and increase the difficulties Nigerians are passing through at a time they are trying to recover from the shock of months of COVID-19 lockdown.

Different stakeholders have expressed disgust and resentment at the hike, with former leaders opposing the increase, saying that it is ill-timed and disregard to the challenges faced by Nigerians. The concern of many Nigerians who have criticised the move by the government was predicated on the timing of the policy, which say would further choke the already overstretched people. Available statistics showed that the cost of living in the country has increased by more than 50 percent since the beginning of this administration in 2015.

For instance, the price of petrol in 2015 when President Buhari took over was N87 per litre. Today, it sells for about N160 per litre. The exchange rate of the naira to the dollar in 2015 was about N190. Today, it is about N450. The Value Added Tax was five percent, today, it is 7.5 percent. All these increases in taxes and levies with mounting inflation have substantially reduced the value of the workers’ salaries.

The tariffs or charges Nigerians pay for port duties, electricity, petrol etc, have gone up without getting commensurate services to the point that people are now wondering if the sole intention of government is to snuff life out of hapless Nigerians. The customs, Federal Inland Revenue Service, FIRS, etc are declaring trillions of naira in revenue, while businesses are shutting down.

Again, the number of unemployed Nigerians in 2015 was 5.5 million. Today, it is 21.7 million, according to the National Bureau of Statistics, NBS. It is 28 million if the pool of under-employed Nigerians is added to it. According to the World Poverty Clock, the number of Nigerians living below poverty line (those living below $1.90 per day) grew from 43.1 million in 2015 to 102.1 million in 2020.

Apart from these, the increase in prices of petrol and electricity means that Nigeria is now among the Organisation of Petroleum Exporting Countries, OPEC, with the most expensive petroleum products and the sixth-highest energy cost in Africa. According to official data from the GlobalPetrolPrices.com only citizens of Ecuador, Congo, Iraq, Saudi Arabia, and the United Arab Emirates would henceforth spend more on the petrol than those of Nigeria in the OPEC community.

The product is at least 20 times and six times costlier in Nigeria than in Venezuela and Iran respectively. It is also three times more expensive in the country than it is in Sudan, another Africa’s oil-producing country. In Angola, a country declared as one of the most expensive countries to live, PMS is about 50 percent cheaper than in Nigeria.

From data supplied by the platform, the recently doubled cost of electricity has pushed Nigeria up the cost radar as one of the African countries with the most expensive energy. Whereas the average global cost of electricity is N55.36 and N49.71, for kilowatt units of energy per hour (kWh) for households and businesses respectively, Nigerian consumers will henceforth pay as much as N62 kWh.

Consumers in Ghana, whose industrial sector seems to have been positioned to compete for Nigeria’s market, are charged N24.5 kWh on average. Besides its efficiency advantage, South Africa, Nigeria’s strongest continental competitor, provides its citizens with cheaper energy than Nigeria does. Considering the new charges, Nigeria can only pull ahead of Kenya and other fringe economies such as Togo, Burkina Faso, Gabon, and Cape Verde in the continent’s race to achieving energy cost competitiveness.

This is contrary to claims by Lai Mohammed, minister of information and culture, that Nigeria has one of the lowest prices of petrol in the West/Central African sub-region. The minister had on Monday, September 7, said: “Despite the recent increase in the price of fuel to N162 per litre, petrol prices in Nigeria remain the lowest in the West/Central African sub-region.”

However, experts are worried that the rising cost of petrol and electricity will hamper economic development and growth. Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry, LCCI, said the new increments would worsen the plight of the manufacturing sector, whose contribution to the gross domestic product, GDP, is less than 10 percent. He noted that the unbearable cost of energy was part of the reason the sector remained uncompetitive.

“For rapid industrialisation, the manufacturing sector should not only serve the domestic market, but also the regional and global market. Check out all the countries that have industrialised; they have not limited their industrial sectors to the domestic market. They play global. But you cannot do that if you are not competitive,” he said.

Bala Zakka, an energy economist, said the rising energy cost would discourage the production and increase unemployment. He said there was a direct relationship between energy cost and the vibrancy of local production, warning that Nigeria could not afford the consequences of deregulation. “When energy cost is high, the unit cost of production will also be high. When that happens, the local industries will not be competitive. We must be very careful; otherwise, we will create a hostile business climate.

“If we continue this way, it will soon be cheaper to import sachet water than to produce here. Deregulation will not increase efficiency; it will rather produce speculative investors. If everybody can import as suggested by deregulation, why would they waste their time going into production,” he questioned.

On his part, Joe Ajaero, secretary-general, National Union of Electricity Employees, NUEE, said all operators, regulatory bodies and agencies in the Nigerian electricity supply industry, NESI, should immediately meter all consumers and comply with rules of engagement, before compliance with the government’s directives. He canvassed a more humane review that would reflect Nigeria’s economic realities.

Ajaero, who spoke on the socio-economic and political wellbeing of Nigerians, described the present tariff hike as ill-timed and a public disaster. He said since the privatisation of the industry on November 1, 2013, the total available power for consumption had hovered between 3,000MW and 4,500MW, which remained a child’s play when compared to the country’s need.

He listed Nigeria among countries with “chronic power poverty,” noting that, in other climes, citizens were granted tariff holidays to cushion effects of the pandemic. “Against the union’s position, it is unheard of that the process of privatisation could be contemplated and implemented without properly metering electricity consumers nationwide. How would the seller of any commodity not have a proper measuring device to measure its product?

“The tariff review is not commensurate with an increase in salary or adjustment, as previous increases failed to address this anomaly. Tariff increases do not guarantee efficient service delivery,” he said.

In defence of the new increments, President Muhammadu Buhari explained that the outbreak of the Coronavirus pandemic compelled the federal government to make some far-reaching adjustments that may cause some initial pain, but which is necessary for long-term gains.

Speaking at the First Year Ministerial Performance Review Retreat in Abuja, Buhari said the timing of these two necessary adjustments was a mere coincidence. He said the deregulation of PMS prices happened quite some time ago, it was announced on March 18, 2020. According to him, the price moderation that took place at the beginning of this month was just part of the on-going monthly adjustments to global crude oil prices.

Likewise, Bismark Rewane, managing director, Financial Derivatives Company, FDC, said the bold step taken by the federal government to remove subsidies on petrol and electricity, and entrench cost-reflective regimes in the two energy sources would encourage direct investment flows into the power, petroleum and manufacturing sectors of the Nigerian economy.

Rewane predicted that despite the current challenges, the Nigerian economy would witness recovery in the first quarter of 2021, a development it noted, would result from the foregoing policy moves by the government. He made the statement while presenting the company’s monthly economic outlook during the Lagos Business School Executive Breakfast Session for September 2020.

“The bold steps taken so far will encourage direct investment flows into the power, petroleum and manufacturing sector. This will be further enhanced if the exchange rate unification process is boldly tackled and forex rationing is discontinued. In spite of the current recession, the economy will begin healing in Q1 2021 in response to these policy moves. Just like in the words of John F. Kennedy “When the going gets tough, the tough get going,” he said.

With increase in the cost of virtually everything that makes life worth living from foodstuffs to transport, petrol, indiscriminate bank charges, medicare, housing, data bill, paytv, etc, it is obvious that the present government does not care about welfare and security of the people as the constitution provides: that welfare and security of the people shall be the primary purpose of government.

– Sept. 11, 2020 @ 17:55 GMT |

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