Before the slump of oil prices, the Federal Government was already contemplating removing petrol subsidy.
The Minister of State for Petroleum, Mr. Odein Ajumogobia, had engaged labour and other stakeholders with a view to convincing them on the need for an upward review of fuel prices.
The argument then was that it was no longer sustainable for the government to continue to bear the costs of subsidy on petrol, which was being imported at astronomical costs.
Now the table has turned to the flip side. The reality is that Nigerians pay far in excess of the landing cost of fuel. The Petroleum Products Pricing Regulatory Agency (PPPRA) puts the landing cost of petrol at N44.70 per and the total cost of the product, including rentals on government facilities and distribution costs, at N60.90 – almost N10 less than the current pump price of petrol.
The natural thing is for the government to bring down the prices to reflect the current cost. Analysts even believe that now that prices are down is the right opportunity for the government to introduce full deregulation of the sector without drawing the ire of labour and civil society organisations.
But the situation is not as simple as it appears. With the prices of oil down (below $34 a barrel as at yesterday) and Nigeria’s OPEC quota down to about 1.8 million barrels per day, Nigeria’s revenue situation is gloomy. The federal budget is predicated on a benchmark of $45 per barrel and an output of 2.92 million.
In this circumstance, the government would want to wrench money from any source it can. The temptation of holding on to current pump price will be high.
However, with growing hardship occasioned by the global financial meltdown, the citizens are likely to push for lesser petrol prices.
With the government under pressure to touch the lives of the citizens positively, it may not be able to resist this one chance of showing the people that it is sensitive to their plight.
It is a hard choice between being seen as a compassionate government and propping the economy against the tide of the global economic crisis.