Hike in Oil Price: A Battle of Economics

Hike in Oil Price: A Battle of Economics

Oil Price
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Since the discovery of Nigeria’s ‘black gold’ (the crude oil) in 1956 by Shell BP in the Oloibiri area of Rivers State, it has remained the mainstay of the economy. The groundnut pyramid in the North, the cocoa plantation in the West, the blooming cash crop business and coal in the East all gave way to the meteoric rise of the oil business. It is impossible not to appraise the large contribution of oil revenue (s) to the coffers of the National treasury. Thanks to the ‘Black Gold’, the country has enjoyed improved foreign exchange earnings from the export of oil, as well as sizable royalties from the leasehold of some oil fields and oil wells. Importantly, the presence of some of these oil companies adds an appreciable external economic advantage to their host communities in terms of providing social amenities, mouth-watering job opportunities, and scholarship programs to the indigenes of such communities.

One only wonders at the pernicious paradox of value that the discovery and exploration of the new wealth has on the general development of the country. The state of the Nigerian oil sector calls for attention. Beginning with the misappropriation of funds accruing from the export of crude oil to the management of refineries in some parts of the country, the situation worsens! With the recent deregulation of the downstream oil sector, an increase in pump prices was announced by Petroleum Products Pricing Regulatory Agency (PPPRA). From N140.80 and N143.80 in August, it was hiked to about N145.86 and N148.86, before it later increased to N151.56 in September.

Speaking on the upsurge in the fuel price, Mr. Timipre Sylva, Minister of State for Petroleum Resources, in his statement said that, ‘When the price of crude oil goes up, then it means that the price of the fixed stock has gone higher; it will also affect the price of the refined product and that is why you see that product prices are usually not static, it depends on the price of crude oil which goes up and down’.

However, there are concerns raised as Nigerians frown at the progressive hike in the fuel price, which the majority described as ‘inconsiderate’ considering the impact of the COVID-19 pandemic on the people, the economy, and the country as a whole. The Nigerian Labour Congress (NLC) expressed great displeasure in the recent hike in fuel price, warning that ‘there was a limit to what the citizens could tolerate if these abysmal increases in the price of refined petroleum products and other essential goods and services continued.’

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A Nigerian (name withheld) noted by saying that, ‘What does it cost government since 1999 till date to build modern refineries (even modular ones at each geopolitical zone)? Does it mean none of them knows the right thing to do or are deliberately wicked? We are paying for leadership failure, self-centeredness, and greediness.’ Another reasoned by saying that, ‘It is practically unthinkable to have raw materials (crude oil) and still export it to buy back refined products at exorbitant costs of forex over the years.’

Nonetheless, Nigerians have been urged to see the increase in fuel pump price as ‘a blessing in disguise’. President Muhammadu Buhari, while speaking on the initial increment of the fuel price, noted that he is aware of the economic hardship being faced by individuals, and businesses, but stressed that critical decisions had to be taken at this crucial time.

The increase in the prices of petroleum products has resulted in inflation, high cost of living, and inequitable distribution of income in Nigeria. Clearly, whenever there is an increase in prices of oil products, it affects transportation, cost of goods, and other services. Fixation of prices of oil products has always been controlled by the FG. Market forces should be given the liberty to determine the market fuel price. As such, government’s sovereignty over the operations in the sector should be completely deregulated so as to give room for free market/enterprise.

Nike Omosanya and Babatunde Odubanwo

Photo Credit: BBC

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