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Saturday, 1 October 2016

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Breaking News: Fuel Price is now N500 in Anambra Per Litre

The Minister for Petroleum Resources, Ibe Kachikwu, recently, set petrol price at N500 per litre 1st October 2016 ; the NNPC GMD, was however, clearly cautious to avoid a definite declaration that the petroleum down stream sector has become fully deregulated with petrol price increase; however, NNPC’s seeming dictatorial price hike is clearly inconsistent with a deregulated market.

The Minister is certainly also aware that a cap on petrol and kerosene prices, will sustain rent seeking in the distribution chain and make subsidy inevitable.

Although, Kachikwu indicated that importers will source forex at about N495=$1, he did not
explain how the parallel market rates will be restrained below this ceiling, particularly when fuel imports, which traditionally consume almost 40percent of CBN’s total forex supply, ultimately descend on a less liquid black market to source billions of dollars required for fuel imports.

Invariably, deregulation of the petrol market, will remain inchoate with severe market distortions, if fuel price and the applicable Naira exchange rate remain centrally regulated. Furthermore, the surge triggered by fuel importers for parallel market dollars will probably exceed demand and further spike the dollar exchange rate.However, if Naira continues to depreciate, the retention of N500/litre petrol price, will inevitably bring back subsidy... regulated price.

So, if we cannot improve market dollar supply, in the short term to strengthen the Naira, we urgently need to identify the main cause of the eternally surplus Naira that instigates inflation and weaker Naira exchange rate at CBN’s Naira deprecating dollar auctions. Our continued denial of this reality will condemn any hope of inclusive growth or a diversified economy. Furthermore, unemployment and inflation rates will sadly remain unbridled and pose increasingly serious threats to our social welfare and national security.”