2-IN-1 STORY: Fuel Price Hike: Reps Convene Special Session, Summon Oil Minister, Kachikwu; 2 Million Tonnes Of Petrol Stuck On High Seas

Inside the chambers of the House of Representatives

The House of Representatives has convened a special session at which Minister of State for Petroleum, Ibe Kachikwu, will interact with the lawmakers over the new premium motor spirit price regime hiked to ₦145 lask week, some lawmakers, including Ahmed Kaita and Akeem Adeyemi have disclosed.

PREMIUM TIMES report continues:

The special session is slated for today, Monday, at noon – a shift from its regular schedule of plenary which holds Tuesdays, Wednesdays and Thursdays starting.

Last week, Mr. Kachikwu announced the new price regime capped at ₦145 from a subsidized rate of ₦86.50.

The Vice President and head of government’s economic team, Yemi Osinbajo, said the new policy became imperative following decline in foreign exchange earning.

“The NNPC exchanges crude from its joint venture share to provide about 50% of local fuel consumption. The remaining 50% is imported by major and independent marketers.

“These marketers up until three months ago sourced their foreign exchange from the Central Bank of Nigeria at the official rate. However, since late last year, independent marketers have brought in little or no fuel because they have been unable to get foreign exchange from the CBN. The CBN simply did not have enough. (In April, oil earnings dipped to US$550 million. The amount required for fuel importation alone is about US$225 million!),” Mr. Osinbajo said, in Presidency’s “our story”.

The fuel price hike is expected to worsen Nigeria’s growing inflationary trend which has seen prices of goods, especially food items, skyrocket at a time some states of the federation have not paid workers’ salaries for months.

Ahead of Mr. Kachikwu’s meeting with the House, Mr. Kaita disclosed to PREMIUM TIMES that “about 68” APC lawmakers had been meeting since Saturday to ensure support for the new policy from the National Assembly end.

But a PDP lawmaker who does not want to be named said his party caucus would “criticize and oppose” the new policy to “let Nigerians see the hardship brought on them by the APC and Buhari”.

2 Million Tonnes Of Petrol Stuck On High Seas

Meanwhile The Nation reports that at least 75 ships with two and a half million tonnes of fuel are awaiting importers on the high seas as Nigerians can’t find the dollars they need to pay for the cargoes, according to ship tracking data and fuel traders.

A Reuters report said some of the vessels arrived a month ago and their frustrated owners have almost given up hope and started to offer their fuel to buyers outside Nigeria.

A slump in world oil prices has hammered Nigeria’s state income and because crude sales are the government’s main source of revenue the fall has caused crippling shortages of dollars within the economy that have been hurting businesses for months.

In a bid to break the impasse and head off more fuel shortages, the government raised the price cap for petrol by 67 per cent officially sanctioned importers to use the black market to find the hard currency they need to get cargoes off the ships and allowed any Nigerian company to import fuel.

Announced last week, the reforms were welcomed by some in the oil industry as badly needed steps in the right direction. The changes have largely eliminated the system of heavily subsidized fuel prices, removing one strain on Nigeria’s increasingly stretched finances.

But the so-called parallel market has struggled to cope with the demand for U.S. dollars that followed the reforms.

Nigeria consumes 45 million litres of gasoline a day, or roughly 280,000 barrels, which would require the market to provide some US$18 million a day. Though importers cover about 30 percent of this, with the state oil firm covering the rest, it is still a big strain on the market for dollars.

The naira has already weakened due to the spike in demand for dollars from fuel importers. Last week, the U.S. currency fell to ₦324 on the parallel market, whereas the official exchange rate has been held firm just under ₦200.

“The risk is that the parallel rate will depreciate even more, giving the marketers a pretext for yet further price increases at the pump,” said Alan Cameron, an economist covering Africa with Exotix Partners.

President Muhammadu Buhari has resisted International Monetary Fund (IMF) calls to devalue the naira, though Vice President Yemi Osinbajo sparked speculation a devaluation may be on the cards when he said the Central Bank had to change its policies.

Nigeria has four refineries but decades of neglect mean it has to import most of its fuel, which was less of a problem when crude was at US$115 a barrel and the OPEC member was the leading oil exporter in Africa ahead of Angola.

As well as the slump in crude prices, which touched a 2016 low of US$27 in January and were below $48 last week, Nigeria’s output has also been hit by instability in its oil producing Delta region, further reducing the state’s dollar revenues.

Nigeria’s production dropped this month to 1.65 million barrels per day from 2.2 million and risks slumping to its lowest since 1970.

In an effort to address the looming fuel shortages, the Nigerian National Petroleum Corporation (NNPC) has begun talks with at least three international firms to swap more of its crude for gasoline, according to traders and oil executives.

But the drop in output due to the unrest in the Delta – as well as the fact oil firms take more physical cargoes as payment for services when prices are low – means the NNPC has less crude to swap for fuel.

“There aren’t enough cargoes available to NNPC,” said Dolapo Oni, head of energy research at Ecobank. “I don’t see how it can get more from international oil companies.”

Signs of trouble ahead are growing. On Saturday, Nigeria’s two main labour unions called for an indefinite general strike from Wednesday unless the government reverses its plan to increase the price of petrol, which many rely on for power generation as well as transport.

Raising fuel prices is sensitive because many Nigerians see the state subsidy as the only benefit they derive from living in a major oil producing country which is nevertheless gripped by endemic corruption and poverty.

The West African country tried to end fuel subsidies in 2012, doubling the price of gasoline overnight, but later reinstated some of the subsidy to end a wave of protests.

The only long-term solution for Nigeria is to build its own refineries and fix the infrastructure, according to Chinedu Ukadike, chief of staff to the national president of the Independent Petroleum Marketers Association of Nigeria.