Are PPPRA and PPMC saying that Nigerians buy more cars at a time when youth unemployment has crossed the 50 per cent mark? Even if the cars are everywhere, are we saying that motorists move around more frequently in the face of the federal government’s merciless grip on liquidit
The downstream sector of Nigeria’s oil industry is something of an enigma. It has a penchant for defying the basic principles of economics. Regulators and operators of the sector believe that consumption rises when disposable income takes a precarious nose-dive. They want everyone to believe that supply heads up when demand drops precipitously.
The magicians in the Petroleum Products Pricing Regulatory Agency (PPPRA) and the Pipelines and Products Marketing Company (PPMC) cook up figures to convince the world that supply rises when demand tumbles, and that consumers spend more money when their income is at the lowest ebb. That is the message one could decipher from the strange figures emanating from PPMC and PPPRA on Nigeria’s petrol imports and consumption. Four years ago Nigeria’s economy was growing at an enviable rate of seven per cent annually.
At that point, the economy was consuming less than 30 million litres of petrol daily.
Then the egg heads in America’s oil industry battled to end their country’s heavy dependence on imported crude oil. They developed the technology to drill oil from rocks and flooded the oil market with light, sweet crude that could contest the market with Nigeria’s Bonny Light.
As America’s shale oil producers attained the legendary feat, China’s economy, the world’s second largest, lost its voluptuous appetite for crude oil to the slump in exports.
The resultant glut in the global oil market drove down oil prices.
The men in Saudi Arabia’s oil price war room responded to the glut and consequent drop in oil price with more glut.
The hypothesis from Riyadh was that when oil price drops below $60 per barrel, shale oil production would be too expensive to sustain. At that point many of the rigs were expected to shut down and push up price. The first outing of the untested theory of fighting tumbling oil prices with supply glut has not been particularly successful.
Rig count in American oil fields has dropped considerably with the glut. But even with the price of crude sailing perilously close to $40 per barrel, shale oil producers, the main targets of the Saudi voodoo economic antics, are still in business. Oil prices are expected to remain weak up to 2017.
Nigeria is one of the main casualties of the failure of the Saudi theory of fighting low prices with glut. Africa’s largest economy has lost 60 per cent of its foreign exchange generating capabilities.
Consequently, annual economic growth rate has dropped from seven per cent to less than three per cent. Last month the monetary policy committee of the Central Bank of Nigeria (CBN) rose from its quarterly meeting expressing fears that the economy might slip into recession in 2016 if steps were not taken to reverse current trends. Everyone is worried by the figures on economic indices churned out by the National Bureau of Statistic and the CBN.
They are all pointing in the direction of recession. But that is not the case with figures on petrol imports and consumption emanating from PPPRA and the PPMC. They are all heading up. With the economy heading in the direction of recession, petrol consumption has surged from less than 30 million litres per day to more than 40 million. Ironically no one is asking questions about the mysterious figures that have depleted Nigeria’s lean foreign reserves in the last four years.
Are PPPRA and PPMC saying that Nigerians buy more cars at a time when youth unemployment has crossed the 50 per cent mark? Even if the cars are everywhere, are we saying that motorists move around more frequently in the face of the federal government’s merciless grip on liquidity?
The figures on petrol consumption from PPPRA and PPMC are even more fallacious when measured against the fact that President Goodluck Jonathan administration’s policy on vehicle imports tariff has driven down vehicle imports by close to 50 per cent.
The mysterious figures on petrol consumption are apparently fueled by the grossly abused policy of petrol subsidy. Nigeria may never know the quantity of petrol consumed within its borders until the shameful dependence on imported refined petroleum products is terminated. The figures on petrol consumption are cooked up to justify what petroleum products marketers fraudulently claim on petrol subsidy.
That figure rose to N2 billion per day when crude oil price firmed up to $60 per barrel in July. Last week with oil price hovering below $50, the open market price of petrol (landing cost plus margins) dropped to N101 per litre.
At that rate, the subsidy on a litre of petrol dropped to N14 when measured against the government-fixed pump price of N87. That takes government’s daily spending on petrol subsidy to N560 million. The federal government’s major task today is that of ending Nigeria’s shameful dependence on refined petroleum products import.
The massive depreciation of the naira in the foreign exchange market is driven by the mounting bills on refined petroleum products and food imports. Fuel is food for automobiles. Rice, fish and chicken are food for humans. Nigeria imports food for humans and automobiles. Until that trend is reversed, the naira would continue its journey down the precipice.