Fuel price hike: MAN, LCCI slam NNPC, forecast inflation surge
…As NEITI decries Port Harcourt Refinery delay
By Seun Ibiyemi
Stakeholders have expressed concerns over the possible impacts of the hike in Premium Motor spirit (PMS) on the Nigerian economy, potentially reversing the recent ease in inflation.
This is even as they berated the Nigerian National Petroleum Company Ltd. (NNPC Ltd) over delay in getting the Port Harcourt Refinery operational, to address recurrent fuel scarcity and price hike.
Recall NNPC Ltd., had postponed the much anticipated commencement of the Port Harcourt refinery six times and jerked up the price of petrol from N568 to N855.
This had raised concerns about local production of petroleum products, particularly Premium Motor Spirit (PMS), to meet the needs of Nigerians.
Initially slated to commence operations in 2021, the refinery’s commencement had faced multiple delays, causing Nigerians to raise concern on the actual position of the refinery..
In December 2023, NNPC Ltd. claimed it had achieved the mechanical completion of rehabilitation work on Area 5 Plant of the refining company and slated its production resumption for Jan. 2024.
The January date also turned out a mirage, with each postponement attributed to various technical, financial, and logistical challenges
Recently, the NNPC Ltd. said its primary producing unit called Close Distillation Unit (CDU) was working, and would be getting off-spec production in days.
Specifically, the oil company said the refinery would come onstream and its oil production would be fit for distribution after certification by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) in September.
Cost of production will soar — MAN
In a swift response to the increase, the Manufacturers Association of Nigeria (MAN), said that the pump price will have an effect on the price of production in the manufacturing sector.
The Director-General of MAN, Mr Segun Ajayi-Kadir, expressed the worry in an interview with journalists in Lagos on Wednesday.
Ajayi-Kadir said that the increase in petrol pump price might lead to increase in transport fares and prices of goods and other services.
He said that this could leave the citizens with less disposable incomes.
The director-general added that decrease in purchasing power would lead to reduced demand for non-essential goods and services, affecting businesses across sectors.
He said that the consequences might include a rise in inflation figures which would negatively impact household budgets.
“One is naturally worried about the impact on the already lacklustre performance of the manufacturing sector.
“In particular, there is no doubt that it will add to production inputs and logistics costs.
“These will lead to higher prices and dwindling disposable income of the average Nigerian,” he said.
Ajayi-Kadir said that while the performance of the manufacturing sector would be negatively impacted, businesses might need to adjust their pricing, which could lead to reduced profit margins if consumer demand would weaken.
“Small and medium-sized enterprises, which often operate on thin margins, could be particularly hard-hit.
“The increased costs could force some to scale down operations or even shut down if they are unable to pass on the additional costs to consumers,” he said.
Fuel hike will lead to inflation surge — LCCI
Also, the Lagos Chamber of Commerce and Industry (LCCI) has said that the hike in fuel price from N568 to N855 would trigger widespread price increases, potentially reversing the recent ease in inflation.
Director General, LCCI, Dr Chinyere Almona, said this in a statement on Wednesday in Lagos.
She noted that the official price of petrol, now at N855, was a clear indication that the shortfall between the landing cost and the former price level of N568 charged by Nigerian National Petroleum Corporation Ltd.(NNPCL) had been reduced.
Almona, however, said that completely removing it and subjecting Nigerians to a significant fuel price hike presented significant challenges.
“A steep price hike would likely trigger widespread price increases, potentially reversing the recent ease in inflation seen in July and leading to another surge in inflation rates.
“Balancing the need for fiscal responsibility with the economic impact on citizens is a complex task for the government.
“The impact on businesses will be severe, with fuel prices affecting supply and logistics, power generation, transportation, and factory operations.
“The cost of doing business will skyrocket, prices of goods will rise, and some firms may shut down due to low demand in the face of weakening consumer purchasing power. Of course, this will be followed by job losses,” she said.
Almona said the operation of the Dangote Refinery, which now produces fuel and diesel for sale, offered a glimmer of hope.
She said this game-changing intervention could restore some stability to the oil and gas sector, which had been grappling with significant distortions in 2024.
The LCCI D-G advocated a more sustainable approach to support the development of additional local refineries to process crude for local consumption and potential export across Africa.
This long-term strategy, Almona said, was crucial for the stability and growth of our economy.
“As an immediate intervention, it would be beneficial for the Port Harcourt Refinery to commence operations alongside production from the Dangote Refinery.
“Given the current challenges with importing refined fuel, relying on local production may be the most viable option at this time.
“We recommend sustaining local supplies, with the expectation that demand will eventually align with supply, leading to equilibrium pricing across various sources,” she said.
…As NEITI, others decry Port Harcourt Refinery delay
Meanwhile, the Executive Secretary, Nigeria Extractive Industries Transparency Initiative (NEITI), Dr Orji Ogbonnaya faulted the NNPC Ltd. for failure to update the public on the exact status of the refinery.
Oriji underscored the need for consistent and clear updates on the refinery’s progress to foster trust and manage public expectations.
He assured that NEITI would update Nigerians on the rehabilitation of the refinery and the cost in its ongoing 2022/2023 industry report to be published in September.
According to him, the previous NEITI reports revealed that N200 billion has been expended between 2020 and 2021 on the turnaround maintenance of the refinery during the period.
Orji recalled that he led a team which included officials of NEITI and the Civil Society Organisations (CSOs), as well as media representatives on an assessment tour of the refinery in April.
“For us in NEITI, we do not depend on speculation, rather we depend on data.
“Our last report showed that over N200 billion was spent on the refinery and it hasn’t started working, so we decided to embark on the trip.
“From our assessment, impressive work was going on in the refinery. There was an issue of test running of which the NNPC Ltd. described as a painstaking exercise,” he said .
The National President, Host Communities of Nigeria Producing Oil and Gas (HOSTCOM), Dr Benjamin Tamaramiebi also expressed dissatisfaction with the NNPC Ltd. on its handling of the Port Harcourt refinery repairs.
He decried the situation whereby Nigeria, for more than 25 years, had been importing fuel, adding, “it’s high time it stopped.”
Tamaramiebi called for concerted efforts and commitments to ensure that the refinery becomes operational.
He also underscored the need for the government to encourage and support the Dangote Refinery to start refining in order to stop importation of the product.
Speaking in the same vein, an Economic Expert, Dr Sand Mba-Kalu, underscored the need for clear, regular updates on the progress of the refinery’s rehabilitation to foster public trust.
Mba-Kalu, the Executive Director, Africa International Trade and Commerce Research, said swift action was required to ensure timely completion of the rehabilitation of the refinery.
“The government and NNPC Ltd. seem not to be telling Nigerians the truth about the refinery,
“The shortage and high cost of petroleum products continue to burden households and businesses nationwide.
“The delay has stifled potential economic growth, job creation, and industrial development that could have stemmed from a fully operational refinery,” he said.
The expert said effective management of resources was crucial to guarantee the long-term viability and efficiency of the refinery.
He added that immediate measures should be implemented to mitigate the high cost and scarcity of fuel to ease the burden on Nigerians.
According to him, the development of additional refineries and a comprehensive strategy for the petroleum sector is essential for future stability and growth.
