Fuel price hike: Business operators panic, fear shutdown, job losses

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Fuel price hike: Business operators panic, fear shutdown, job losses

Members of the organised private sector, on Wednesday, expressed fear over the possible shutdown of businesses and job losses following the hike in the pump price of Premium Motor Spirit, popularly called petrol, by the Nigerian National Petroleum Corporation Limited and fuel marketers.

On Tuesday, the NNPCL and other oil marketers raised the price of petrol from about N537/litre to between N617 and N630/litre, a development that triggered widespread anger across the country.

Commenting on the matter, the President, Manufacturers Association of Nigeria, Francis Meshioye, said the unpredictability of fuel price hikes would take a serious toll on manufacturers who already had to readjust budgets to factor in the added costs caused by the removal of fuel subsidy.

He said the increase in fuel price had already raised the cost of logistics, which would be compounded by the latest hike.

He stated that given the trend, there were fears among manufacturers that this might not be the final increase and urged the government to develop a culture of engaging key stakeholders before decisions with far-reaching consequences such as this, were taken.

“When fuel subsidy was removed, most people were of the opinion that the change that would occur was going to be a one-off change. If there was going to be any change, we expected little, not a skyrocketing one.

“The signal this gives to the business community is that – are we sure this is the final increase? Some of our members have tried to make some readjustments. This will make nonsense of the budget that we have done. We have said it severally, when it is difficult for you to operate, what happens next?

“If people are unable to come to work and you have to increase prices for consumers, what will happen? And where is the purchasing capability of the consumer to really purchase?” Meshioye stated.

Also speaking, the Deputy President, Lagos Chamber of Commerce and Industry, Gabriel Idahosa, said the increase in petrol price would usher in severe hardship for businesses, especially in the near-term.

Idahosa said, “In the near term, there will be a lot of hardship. A lot of small businesses will crumble completely. There will be a drop in production capacity. How fast we can get out of it is what the conversation is about now.”

On his part, the President, Association of Small Business Owners of Nigeria, Femi Egbesola, expressed worry that more businesses would collapse due to the increased hardship that would characterise the operating environment.

According to him, increasing the pump price of petrol at a time small businesses were fighting for their lives as result of the recent removal of fuel subsidy was a “sledge hammer” that would annihilate many SMEs.

Egbesola said, “It is a sledgehammer on micro and small businesses. I just wonder how we will survive. I must tell you I am confused. The economy has been in a basket, but this is suicidal. I foresee quite a lot of businesses going under. I don’t see how micro and small businesses can survive this. Many will go down.”

Also speaking, the National Vice President, Nigerian Association of Small Scale Industrialists, Segun Kuti-George, said the development would put further strain on businesses that were already grappling with increased costs associated with the government’s recent economic reforms.

He said, “It will bring additional burden on manufacturers who have to contend with the creation of alternative sources of energy to run their businesses. The only fearful thing for me is that our own case as a country does not obey economic theories. It doesn’t respond to market forces.

“It should not be an upswing all the time. If the price of crude in the international market comes down, it is expected that the pump price should also come down. But whether that will happen in Nigeria is a different ball game because whatever goes up, stays there.”

In the same vein, the National Vice Chairman, Nigeria Association of Small and Medium Enterprises, Solomon Aderoju, said more businesses would fold operations in light of the unbearable costs, which has been worsened by the increase in fuel price.

Aderoju said, “It will increase the cost of operations. Many SMEs are packing up already. MPR is 18.5. The rate of inflation is 22.79 per cent. So, no SME can thrive under this environment, with these kinds of government policies. More are still going to close down. I bought fuel for N14,000 today. It cannot last me more than a day or two. It will affect us tremendously. It is quite unfortunate.”

NLC convenes meeting

Also on Wednesday, the Nigeria Labour Congress said it would summon a National Executive Council meeting following the hike in fuel price.

NLC’s National Treasurer, Hakeem Ambali, made this known in a text message with one of our correspondents.

The organised labour comprising the NLC and Trade Union Congress in separate statements issued Tuesday accused the government of robbing the poor to feed the rich. The congresses also accused the government of failing to stay true to the terms of negotiations.

When contacted to speak on the way forward, Ambali said the NLC would summon a NEC meeting. He, however, noted that a date had not been fixed yet.

“A NEC meeting will be convened but a date has not been fixed yet,” he stated.

Also speaking, the National Vice President, TUC, Tommy Etim, blasted the government for dragging the congresses to court.

“As you are aware, we were charged to court and we have been prevented from protesting. This is a dictatorship. The government should not tread this part.”

Meanwhile, Lecturers under the aegis of Colleges of Education Academic Staff Union, on Wednesday, announced that their members would only go to their respective campuses twice weekly till the government addressed the issues caused by the removal of subsidy.

The union in a statement issued by its National President, Dr Sam Olugbeko, stated that its members could no longer survive on the current minimum wage, hence it had directed its members to only go to work twice weekly.

The statement read in part, “The national leadership of our great union in its extraordinary meeting held on Tuesday, July 18, 2023, agreed to direct its members to go to work two days weekly until Federal Government yields to its demand of 200 per cent increase in salary amidst the difficulty of members to get to work as a result of hike in the price of petrol.

“The implementation of removal of fuel subsidy by the Federal Government two months ago raised the price of a litre of petrol by 250 per cent. This worsened the inflationary rate on the cost of transportation, food and other essential commodities and impoverished the Nigerian people.

“Workers, including staff of Colleges of Education, kept faith with the government and chose to endure the untold hardship thinking it would be only for a while as the government promised to roll out palliative measures including significant increase in salaries.

“Alas! While our capabilities to sustain hope were already exhausted, the price of petrol rose further to N650 per litre. Now, the leadership of the union has been inundated by members’ complaints that they could no longer go to work as a result of hike in the price of petrol and resultant high cost of transportation.”

The union stated that “against this backdrop, it has become inevitable for the union to direct members to go to work only two days weekly, while an emergency NEC meeting shall be convened to ratify this decision and decide on the specific days of the week members are to go to work.”

Speaking on the way forward, the union called on the government to immediately seek a lasting solution to prevent a crisis in colleges of education.

Reps summon NNPCL

The House of Representatives rejected a motion to stop an increase in the price of petrol and revert to the old price of N537 per liter.

It resolved to investigate the sudden increase in the price of petrol and the resultant increase in transport fares across the country.

The House asked its committee to propose palliative measures to be taken to ameliorate the sufferings of Nigerians.

The House said since it had already resolved to investigate the increase, it would amount to pre-empting the work of the investigative committee by ordering the suspension of the price increase.

In a motion of urgent public importance by Ikenga Ugochinyere, the House asked the Group Managing Director, NNPCL, Mele Kyari, and oil marketers to appear before an ad hoc committee to explain the increase.

The ad hoc committee is also finding ways to ensure the effective distribution of palliatives to Nigerians to cushion the effect of subsidy removal.

Ugochinyere said section 88 (1) and (2) of the Constitution of the Federal Republic of Nigeria, 1999 (As Amended) empowers the National Assembly to conduct investigations into the activities of any authority executing or administering laws made by the National Assembly.

He also said further that Section 32 of the Petroleum Industry Act, 2021 saddles the Petroleum Midstream and Downstream Regulatory Authority with the task of regulating and monitoring technical and commercial midstream and downstream petroleum operations in Nigeria.

Naira devaluation

The crash of the naira against the United States dollar contributed significantly to Tuesday’s hike in the pump price of petrol, the Major Oil Marketers Association of Nigeria stated on Wednesday.

MOMAN specifically stated that the devaluation of the local currency led to an increase in the price of petrol by N100/litre, as it stressed that the cost of crude oil and the exchange rate accounted for over 80 per cent of the cost of PMS.

Speaking at a virtual conference, on Wednesday, organised by the association to explain the sharp rise in the cost of petrol from about N537/litre to N630/litre, depending on area of purchase, the Chairman, MOMAN, Olumide Adeosun, said, “In recent months, the price of PMS has remained relatively stable.

“On May 20, 2023, Platts reported a price of $827 per metric tonne, and on July 14, 2023, it was $859.25 per MT. However, there has been a significant increase in the foreign exchange rate.

“We can infer from our calculations in May that the Nigerian National Petroleum Company Limited determined its pump price using an exchange rate of about N630 to the dollar, while banks reported an exchange rate of approximately N650 on the Investors and Exporters window.

“As of today, the liquid exchange rate is close to N825 to the dollar. This devaluation adds N100 to the cost of importing a single litre of PMS into the country. Consequently, an increase in the pump prices of petrol should be expected.”

Adeosun reiterated MOMAN’s support for the policy of deregulation in the petroleum industry and acknowledged the challenges faced by the Nigerian public, adding that the group “extend our deepest empathy to all citizens during this time.”

He explained that the international price of crude oil and the exchange rate constituted the largest components of the cost build-up for Premium Motor Spirit, accounting for over 80 per cent.

“The remaining 20 per cent includes statutory dues, distribution costs, and margins. Deregulation promises a transparent and level playing field where cost-reflective prices are evident at fuel stations. It follows, therefore, that in a liberalised market, the pump price of PMS should accurately reflect the current economic realities,” he stated.

He further stated that in the spirit of transparency, MOMAN advocated for federal, state and local governments, as well as employers of labour to implement palliative measures to support less privileged individuals in society currently facing hardships.

The MOMAN chair said it was essential that rapidly executed palliative measures received wide publicity to alleviate the already agitated public sentiments.

“At MOMAN, we have always anticipated that the removal of subsidies and the stabilisation of the downstream market would be a gradual process.

“This process necessitates operators and regulators to engage the public transparently, earn public trust, and foster fair competition that ensures full value for customers at the fuel pumps.

Petrol sells N700

There was massive anger in Anambra State as commuters and motorists were hit by the sudden hike in the pump price of petrol from N530 to N700.

This is just as motorists and other users of the product besieged various petrol stations and were buying the product in larger quantities in anticipation that the price might shut up to N800 from Wednesday.

Our correspondent gathered that the petrol stations in major cities of Onitsha, Nnewi and Awka sold the product at N530 per litre as of Tuesday morning before news of the current increase in pump price filtered into town.

It was also observed that apart from outlets of NNPCL and other major marketers that sold fuel at between N620 and N630/litre across Sokoto metropolis, other independent marketers sold itat N670/litre.

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