New Fuel Price? Impacts Of A New Fuel Price On The Economy Of Nigeria

Speculations have pointed to the fact that a new fuel price may soon emerge in Nigeria. In the first quarter of 2021, there has been fluctuations in the pump price of fuel in the country.

In March 2021, Nigerians woke up to the news of an impending nation wide increase in the price of fuel. The Petroleum Products Pricing Regulatory Agency in charge of fixing the price of fuel and other petroleum products ,released a proposed pricing template that suggested a new landing cost and pump price of fuel and other petroleum products in the country. The proposed template, suggested that the new pump price of fuel in Nigeria was expected to range from N209.61 to N212.61 per liter.

The news was trailed with outcries and criticisms, as Nigerians groaned profusely over the newly proposed price hike. It is a general knowledge in the country that a price hike in the cost of fuel, evidently results in a price hike of almost every goods, products and services in the country. There were rumours of planned protests to kick against the proposed fuel price.

In a timely intervention, the Federal Government stepped in, debunking the news about a hike in fuel price, stating that the pump price which was N162 per litre will still be maintained.

However, let us not forget that while the Federal government does everything within its power to maintain the fuel price at N162 per litre so that Nigerians can afford to pay cheaper prices of fuel, the government is spending millions of naira to maintain the price to be at an affordable rate for Nigerians. This the Government does through the payment of subsidy.

There are now speculations making rounds that the Federal government may soon put an end to the payment of fuel subsidy in the country. According to reports, in the past 10years, the Federal Government of Nigeria has spent around N10.3 trillion on oil subsidy alone, an amount which would very much move the country forward if invested in other sectors of the economy.

Additional, these reports have revealed that the Government spends around N3.4 billion daily(approximately N120 billion monthly) on fuel subsidy, causing deficits in the development of other sectors of the country.

Experts have projected that with the removal of fuel subsidy, the country would be saving approximately N1 trillion on a yearly basis, a somewhat watery and tempting offer the government is faced to consider. Hence earlier hints that the President Muhammadu Buhari Administration is considering the removal of fuel subsidy in Nigeria in 2021.

Now there are speculations suggesting that if fuel subsidy is removed, the cost of fuel will be fixed at N256 per litre. With this price it would be expected that there will be various impact both good and bad, on the economy of the country.

What Would Be the Negative Implications of The Increased Price?

Firstly, with a hike in fuel price, comes with a leap in the price of transportation across the country. Travellers and commuters will then be faced with new prices in the cost of transportation within their states and in interstate travels. Public transport fare will flare up as drivers will have to compensate for the high cost in the new pump price of fuel.

Second, with the increase in pump price, which will then lead to increase in transportation, the prices of food items and other commodities/products will also experience a hike in price. Food prices will sky rocket in the market.

Evidently the increase in the pump price in fuel will cause an increase in the prices and services of virtually every sector in the country. No doubt this development will bring a huge burden on Nigerians, straining the pockets of the common and average Nigeria.

However let us look on the brighter side of this. The increase of the fuel price may come as a result of the removal of fuel subsidy, which means despite the fact that Nigerians will be paying a high cost, the Country will be saving a whole lot of funds which will be in the best interest of Nigerians.

Let’s adopt the projections that the Government of the day would be saving around N1 trillion per annum. There is a whole lot of good that would come out of this amount.

According to metrics data, building a crude oil refinery would cost around $5-$15 billion taking to heart certain considerations, converting this to naira places the amount at approximately N6.2 trillion. So in 6years or less, Nigerian will own a standard crude oil refinery saving the country the cost of importing refined fuel which cost about 1.3 trillion( in 2019).

With both the yearly N1 trillion saved from fuel subsidy and the N1.3 trillion saved from importation of fuel, enormous funds will be invested into other primary sectors that will not only boost the economy of the country, but also improve the standard of living for Nigerians.

With the saved up funds from the subsidy, the agriculture sector of the country could also be revamped, improved farming operations, quality hybrid seeds and more empowerment, food production in the country will skyrocket, thereby eliminating any tendency for an exhurberant increase in food prices.