There’s no fun way to announce this, so let’s just rip out the band-aid. In breaking news, the Daily Trust reports that fuel price has increased in Abuja to ₦617 per litre.
It’s all anyone is talking about. Fuel is currently the number one trending keyword on Twitter.
This isn’t pretty news for many Nigerians who looked forward to renewed hope when President Tinubu was sworn into office.
A tale of two eras
At his inauguration, Tinubu went off-script and announced the removal of the fuel subsidy. This announcement, in more ways than one, signalled the start of a new era. For context, the average retail price of fuel in April was ₦254 per litre.
At the time of the announcement, Tinubu was greeted with applause by some Nigerians. Exactly 50 days later, not many people are applauding him, as painful realities have set in.
Granted, the removal of the subsidy was a foregone conclusion. All the leading presidential candidates promised that it would be gone. A decades-long experiment that amounted to trillions of naira finally led Nigerians to see that it was no longer sustainable. However, there have been continued debates on whether Tinubu’s approach was the best.
Tinubu’s early moves in office suggested he was undertaking neoliberal economic reforms, which he was implementing all at once. These include the unification of the exchange rate and the widening of the tax base. While he was lauded in several quarters for the boldness and swiftness with which he undertook them, there were fears that all these measures implemented in one go could exert pressure on the economy.
KPMG, in its economic snapshot for June, noted: “We are of the opinion that while these reforms and adjustments are bold and indeed necessary to maintain long-term macroeconomic stability, the timing could be adjusted to allow households and businesses to adjust.
“However, the government appears to have decided on a strategy to push through all its difficult and needed reforms all at once and as fast as possible while it is still easier to do… This approach has, however, had mixed success across countries.”
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Reduction in fuel consumption, increase in fuel price
On Monday, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) announced that fuel consumption has declined since the removal of the subsidy. Not surprising since people are now rationing fuel due to the increase in cost. But by just how much has consumption dropped?
Here’s what Ahmed Farouk, the Chief Executive of NMDPRA, had to say about that:
“In January, consumption was 62 million litres per day. In February, 62 million litres per day. March was 71.4 million litres per day. In April, it was 67.7 million litres per day. May had 66.6 million litres per day. By June, it was 49.5 million litres per day. In July, it’s 46.3 million litres per day.”
Farouk noted that the new figure of 46.3 million litres per day represented a 35% reduction compared to the 65 million litres per day before the subsidy removal.
A drastic reduction in the demand for fuel should ordinarily result in a fall in the price of fuel. On the contrary, fuel price is going up.
One possible explanation for this is the exchange rate. Nigeria imports its refined crude using dollars, and with the naira falling relative to the dollar, it will reflect in the prices. We can only hope the price will reduce when Dangote’s refinery begins operations, which is still projected for year’s end.
Meanwhile, the Nigerian National Petroleum Company Limited (NNPCL) raising petrol prices in Abuja from ₦537 to ₦617 per litre will signal other independent marketers nationwide to follow suit. The price of petrol varies across states. Prices are expected to be higher up north than down south due to transport and logistics costs.
Renewed hope vs renewed worries
In an earlier report about Tinubu’s economic growth plan, we noted that the euphoria Tinubu earned in his early days in office would eventually run out. This was echoed by political commentator Feyi Fawehinmi when he said, “Tinubu’s early moves have all been plucking low-hanging fruits. But you still have to credit him for bothering to pluck them… [He] will eventually run out of easy wins; the test starts then.”
Between the labour unions clamouring for an upward review of the minimum wage, a running court case disputing his right to be president, and millions of Nigerians feeling the economic crunch, Tinubu is in a race against time to deliver the renewed hope that he promised. Whatever ace he may have up his sleeves, now’s the time to play it.
