New tariffs push prices above global average
Geoff Iyatse and Gloria Nwafor
Sept. 10, 2020
Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed (left); Co-Chairman, National Steering Committee (NSC) for the Preparation of the National Development Plans: Medium Term National Development Plan 2021-2025 and Nigeria Agenda 2050, Peter Atedo Peterside and APGA National Chairman, Victor Oye briefing State House Correspondents after the inauguration of the Committee on Nigeria Agenda 2050 by President Muhammadu Buhari at the Presidential Villa, Abuja…yesterday
Nigeria’s among OPEC’s most expensive petrol products
• Sixth highest electricity tariff in Africa
• ‘It’ll soon be cheaper to import sachet water than
• Nigerians blame poor power supply on regulatory lapses, others
•NUEE, NECA canvass metering consumers before tariff review
With tariff hikes in two key sectors, Nigeria is among the Organisation of Petroleum Exporting Countries (OPEC) having the most expensive petroleum products and the sixth-highest energy cost in Africa.
According to official data sourced from GlobalPetrolPrices.com and analysed by The Guardian yesterday, only citizens of Ecuador, Congo, Iraq, Saudi Arabia, and the United Arab Emirates would henceforth spend more on the premium motor spirit (PMS) than those of Nigeria in the OPEC community.
The product is at least 20 times and six times costlier in Nigeria than in Venezuela and Iran respectively. It is also three times more expensive in the country than it is in Sudan, another Africa’s oil-producing country. In Angola, a country declared as one of the most expensive countries to live, PMS is about 50 percent cheaper than in Nigeria.
With automotive gas oil (AGO), otherwise known as diesel, selling for about N220, the cost of the product is about 50 percent lower than the global average. Yet, AGO is much more expensive in Nigeria than in most of the country’s OPEC peers. The cost of the product in Angola, Iran, Saudi Arabia, and Sudan is 75 percent lower than in Nigeria.
Businesses in other OPEC members such as Algeria, Angola, Ecuador, Qatar, and Kuwait also spend far less on AGO than their counterparts in Nigeria. Egypt, Ethiopia, and Tunisia are among Africa’s leading economies where AGO is cheaper than in Nigeria, a leading oil producer.
From data supplied by the platform, the recently doubled cost of electricity has pushed Nigeria up the cost radar as one of the African countries with the most expensive energy. Whereas the average global cost of electricity is N55.36 and N49.71, for kilowatt units of energy per hour (kWh) for households and businesses respectively, Nigeria’s consumers will henceforth pay as much as N62 kWh.
Consumers in Ghana, whose industrial sector seems to have been positioned to compete for Nigeria’s market, are charged N24.5 kWh on average. Besides its efficiency advantage, South Africa, Nigeria’s strongest continental competitor, provides its citizens with cheaper energy than Nigeria does.
Considering the new charges, Nigeria can only pull ahead of Kenya and other fringe economies such as Togo, Burkina Faso, Gabon, and Cape Verde in the continent’s race to achieving energy cost competitiveness.
The Minister of Information and Culture, Lai Mohammed, at a press conference held in Abuja on Monday, said: “Despite the recent increase in the price of fuel to N162 per litre, petrol prices in Nigeria remain the lowest in the West/Central African sub-region.”
HOWEVER, the minister and his colleagues, who joined him in the briefing, did not draw a comparison between the cost of PMS in Nigeria and other traditional oil-producing countries.
The Petroleum Products Pricing and Regulatory Agency (PPPRA) may have also realised that its initial insistence that pump price is adjusted in line with the direction of the international market is no longer tenable.
On Wednesday, the agency retracted its earlier position, saying there was no relationship between prices of crude oil in the international market and the pump price of petroleum products in Nigeria, a statement many have described as contradictory.
Six-month data analysed by The Guardian have shown that the PMS official price adjustment is not consistent with crude prices.
A three-month moving average of the leading blends during the recent recovery was altered last week, as prices turned southwards. As of yesterday, the average price of the top three blends — WTI, Brent, and Bonny Light — was $39.61.
A month ago, its average price was $40.63; while, on July 10, it stood at $40.86. The market has returned to the somber lockdown prices when PMS was pegged at N121.50.
The rising cost of energy is a source of worry to development and growth experts. Director-General, Lagos Chamber of Commerce and Industry, Muda Yusuf, told The Guardian that this would worsen the plight of the manufacturing sector, whose contribution to the gross domestic product (GDP) is less than 10 per cent. He noted that the unbearable cost of energy was part of the reason the sector remained uncompetitive.
“For rapid industrialisation, the manufacturing sector should not only serve the domestic market but also the regional and global market. Check out all the countries that have industrialised; they have not limited their industrial sectors to the domestic market. They play global. But you cannot do that if you are not competitive,” Yusuf said.
Bala Zakka, an energy economist, who kicked against the deregulation of the energy sector, said the rising energy cost would discourage the production and increase unemployment. He said there was a direct relationship between energy cost and the vibrancy of local production, warning that Nigeria could not afford the consequences of deregulation.
He said: “When energy cost is high, the unit cost of production will also be high. When that happens, the local industries will not be competitive. We must be very careful; otherwise, we will create a hostile business climate. If we continue this way, it will soon be cheaper to import sachet water than to produce here.
“Deregulation will not increase efficiency; it will rather produce speculative investors. If everybody can import as suggested by deregulation, why would they waste their time going into production?”
SPEAKING on tariff hikes, especially the increase in electricity consumption cost amid poor supply, Nigerians are worried that the regulatory framework may have been hijacked from the Nigeria Electricity Regulatory Commission (NERC).
They noted that NERC, as a regulator, had been docile in discharging its responsibilities to Nigerians, as industry players violated rules at will.
They described the issue as a double tragedy for the masses, following additional increase in fuel pump price.
They said it was a “wicked approach” for the government to have increased prices of such essential commodities when citizens were still struggling to feed their families and make a living amid the COVID-19 pandemic.
National Union of Electricity Employees (NUEE) called on operators, regulatory bodies, and agencies in the Nigerian electricity supply industry (NESI) to immediately meter all consumers and comply with rules of engagement, before compliance with the government’s directives.
Secretary-General of the NUEE, Joe Ajaero, canvassed a more humane review that would reflect Nigeria’s economic realities. Ajaero, who spoke on the socio-economic and political wellbeing of Nigerians, described the present tariff hike as ill-timed and a public disaster.
He said since the privatisation of the industry on November 1, 2013, the total available power for consumption had hovered between 3,000MW and 4,500MW, which remained a child’s play when compared to the country’s need.
He listed Nigeria among countries with “chronic power poverty,” noting that, in other climes, citizens were granted tariff holidays to cushion effects of the pandemic.
“Against the union’s position, it is unheard of that the process of privatisation could be contemplated and implemented without properly metering electricity consumers nationwide. How would the seller of any commodity not have a proper measuring device to measure its product?
“The tariff review is not commensurate with an increase in salary or adjustment, as previous increases failed to address this anomaly. Tariff increases do not guarantee efficient service delivery,” he said.
He also argued that the current increase in tariff was not cost-reflective, as Nigerians had been compelled to pay more for power not consumed through estimated billing.
He advised operators to rather consider service-based tariffs, which would be a direct reflection of the number of hours power was supplied to a consumer.
Director-General of NECA, Timothy Olawale, told The Guardian that, if electricity were provided, consumers would not challenge the payment of cost-reflective tariffs.
Given the current economic realities, he said, resolving salient power issues would be a major step to reviving the economy and returning it to steady growth.
He maintained that the major sore point for organised businesses and consumers was the incidence of estimated billing, which had pitched the DisCos against consumers.
Meanwhile, the Nigeria Labour Congress (NLC), and the Trade Union Congress (TUC) is considering the next line of action regarding electricity and fuel price hikes.
NLC President, Ayuba Wabba, condemned the “deaf and dumb” posture of NERC, urging it to take decisive action on DisCos’ plans to implement the new tariff, as previous hikes had been trailed by a huge leap into hours of darkness, non-metering of consumers, and exponential rise in incidences of estimated billing.
The TUC President, Quadri Olaleye, noted that increasing petroleum pump prices and electricity tariffs at a time people were losing jobs, and when businesses were adversely affected by COVID-19, was a wicked step.
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