Iledare urges FG to avoid blanket petrol subsidies

A petroleum economist, Prof. Wumi Iledare, has urged the Federal Government to resist returning to blanket petrol subsidies as rising crude prices push up domestic pump prices.

Iledare, a Professor Emeritus of Petroleum Economics, gave the advice in an interview with the news reporters on Saturday in Lagos.

Newsmen report that Dangote Petroleum Refinery on Thursday raised its Premium Motor Spirit (PMS) gantry price by N85 per litre, from N1,265 to N1,350, representing fresh upward pressure on petrol prices nationwide.

According to Iledare, rising petrol prices are not unusual in a deregulated market, particularly when international crude oil prices increase.

“Crude remains the dominant feedstock cost for PMS, so when crude moves from about 100 dollars to 107 dollars per barrel, upward pressure on PMS prices is expected.

“Equally, when crude prices decline, there should be corresponding downward pressure on petrol prices.

“However, there is an important petroleum economics qualification: the relationship is not perfectly one-for-one.

“PMS prices also reflect refining margins, freight, exchange rates, logistics, taxes and other market costs,” he said.

The petroleum economist said retail petrol prices could respond asymmetrically, rising quickly when crude prices increased but declining more slowly when crude prices fell.

“That asymmetry deserves regulatory and market scrutiny,” he said.

Iledare said the N85-per-litre increase in Dangote Refinery’s gantry price reflected higher replacement and market costs and did not necessarily indicate market failure.

“The real question is whether the resulting price is competitive, transparent and justified by the underlying cost structure,” he said.

He urged the government to cushion the impact of higher fuel prices through targeted and temporary interventions for vulnerable households rather than subsidising every litre of petrol consumed.

According to him, such measures can include targeted cash transfers and other verifiable social-protection mechanisms, alongside investments in mass transit and road infrastructure to reduce transportation costs.

“Nigerians experience the petrol-price shock primarily through transportation and the prices of goods and services.

“Government should also accelerate the development of CNG, LPG and other economically competitive energy alternatives.

“Diversification of the transportation and household energy mix gives consumers options when PMS becomes expensive,” he said.

Iledare also called for stronger competition in the downstream petroleum market through increased refining capacity, transparent crude allocation, efficient import competition where necessary and reliable market information.

He said greater competition would enable consumers to benefit when international crude prices declined, while transparency across the petroleum pricing chain would promote accountability.

“The objective should not be cheap petrol at any cost. Neither should it be expensive petrol in the name of reform.

“It should be a competitive and contestable downstream petroleum market in which prices reflect economic fundamentals, investors receive appropriate returns for their risks, and vulnerable Nigerians are protected from excessive welfare losses,” he said.