Fuel price cut, When will kerosene and diesel prices too come down to reflect the new reality?

Nothing better illustrates the profound disconnect
between citizens and the Jonathan administration
than the brouhaha over the margin of reduction in
the pump price of petrol in the aftermath of the
global slump in oil prices. After weeks of strident
calls for price reduction, Minister of Petroleum,
Diezani Alison-Madueke, would finally announce a
N10 cut from N97 to N87 on a litre of petrol on
January 18.
A day after, the Petroleum Products Pricing
Regulatory Agency, PPPRA’s executive secretary,
Farouk Ahmed, would give a breakdown of how the
new price was arrived at. He gave the landing cost
of petrol as at the close of business on Friday,
January 16 as N74.35 per litre. With the approved
distribution margin unchanged at N15.49 per litre,
he gave the new market price as N89.84 per litre,
leaving N2.84 per litre as subsidy on the new
pump price.
If we expected the petroleum minister and the
petroleum price regulator, PPPRA to touch on the
pump prices of domestic kerosene and industrial
fuel – diesel, nothing of the sort came forth.
Indeed, neither the minister nor the PPPRA boss
said anything about kerosene price which, like
petrol, is supposed to be regulated at N50 per litre
but actually sells for anything between N120 to
N150 in the open market. As for diesel, mostly
used by manufacturers and businesses to power
their operations, although its price is officially
deregulated, in reality, the price is dictated, not so
much by any market fundamentals, but by a
powerful cartel that willy-nilly has the end-users at
their mercy.
The big question here is why the Federal
Government would accept the basis for the
discount on petrol price on one hand, while
denying the same basis for kerosene and diesel on
the other? The answer is to be found in the
grotesque, laisez faire environment of fuel pricing
which the Federal Government has promoted and
sustained over the years, all in the name of
deregulation. Of course, in removing N10 off the
price of petrol – being extremely price-sensitive –
the Federal Government merely moved, albeit
wisely, to take the winds off potential agitations in
the wake of the unceasing demands for price cuts.
Is the measly N10 discount the best the Federal
Government can offer? First, we know that crude
oil prices have tumbled by more than 60 percent
over the last six months. The other known fact is
that the Central Bank of Nigeria (CBN) has
devalued the naira by some 20 percent in the last
few weeks. Whereas the former would ordinarily
have translated to lower landing costs, the latter
would more than guarantee that products cost
would never come down! Here, it seems so easy to
appreciate the bind that the Federal Government
has thrown the country in the event of its failure to
terminate the current regime of fuel importation.
We must say that we consider the argument by
labour and some notable trade associations in
favour of a return to the old price of N65 per litre
persuasive. An offer of a paltry 10 percent discount
only on petrol price is at best tokenistic. How
about the Federal Government seeking to make a
fetish of the PPPRA template also feigning
ignorance of its make-up? That, to be sure, must
be galling.
Of course we know what the template, directly
linked to the current wholesale reliance on fuel
imports, contains. Apart from the Cost and Freight
(C&F) values which are subject to foreign exchange
fluctuations, the other elements have the trappings
of the rentier economy which the downstream
sector is fabulously known for. Domestic
sufficiency in products refining, aside insulating the
economy from the vagaries of currency
movements, would appear the best strategy to
sound the death knell of that rentier segment. That
route, unfortunately, is what the Federal
Government seems least prepared to take at this
time, or ever.