Let crashing of prices begin with government

Some Nigerians were hopeful that the one-month ultimatum announced by the Federal Competition and Consumer Protection Commission (FCCPC), for traders to crash prices will materialise, when a new petrol price of N885 was smuggled into the market. It was curious that on a day the Dangote Refinery Limited (DRL) began refining petrol, a conspiracy was engineered to jerk up the price.

As if that was not enough, news circulated that the Nigerian National Petroleum Company Limited (NNPCL) had been awarded the sole distributorship of DRL petrol, apart from fixing the new price. Both NNPCL and the Petroleum Ministry have denied authorising the new price. After some 48 hours, NNPCL also cleared the air that DRL and other domestic refiners can now sell directly to any marketer of their choice.

Whether NNPCL and government admit it or not, they responded well to the feedback they got from the people by reversing themselves. Aliko Dangote himself had told newsmen that the Federal Executive Council (FEC) will determine the price of DRL petrol. On when the products would reach the market, he said clearly that NNPCL was to decide. Nigerians know what to believe no matter the level of spin.

Now, with one litre of petrol trading for close to N900 at NNPCL retail outlets and far more at others, the FCCPC’s plan to crash prices could be hard to deliver. Higher petrol prices affect costs and retail prices.

It’s a noble intention to seek to end the trend of exploitative pricing of goods unwholesome price fixing by market associations. Giving details of such practices, the Commission said it carried out discreet surveys and found that consumers are being excessively exploited.
Executive Vice Chairman/Chief Executive Officer of the Commission, Mr. Tunji Bello said, “we have observed, for instance, that the margins in the prices of imported goods are very disproportionate in many cases; and in the case of locally produced goods, excessively inflated. This is an untenable situation, particularly in the retail segment, where we have identified patterns of price fixing perpetrated by some market associations, price gouging and other anti-consumer practices.”

Previously, the FCCPC in April 2024, presented a surveillance report on impact of multiple taxes imposed by government on prices of goods. The Director in charge of Surveillance and Investigations, Mrs. B.A Adeyinka, told stakeholders that, “despite government efforts to stabilise the currency, prices remain high. Our findings point to a complex web of factors, including multiple layers of taxation and transportation costs, that are driving prices up.”

Mrs. Adeyinka added: “The cost of transportation is a significant burden on the sellers, and this cost is inevitably passed on to the consumer. For instance, a product that once cost N15,000 now sells for N50,000. This drastic increase is largely due to higher transportation expenses, the rising cost of pesticides, and security concerns in certain areas.”

That was before the current fuel tax introduced by President Tinubu on May 29, 2023 as well as the floating of the naira, causing the local currency to lose significant value. Bloomberg reported the naira to be among the world’s worst-performing currencies in the first half of 2024. That means higher prices inevitably, with more naira chasing fewer goods.

Clearly, government policies are the major drivers of higher prices and excruciating hardship. Citizens are often left to rationalise that in areas where FCCPC is unable to hold government to account for wrongheaded policies, it harasses retailers. Of course, many retailers are crooked and wicked.

Some citizens have tasked the FCCPC to query those who arbitrarily fixed the new pump price of petrol, a development that has compounded the hardship in the land. The reality is such that Nigerians spend hours at retail stations for a product that is not available. Where available, they’re forced to pay exorbitantly because citizens are helpless. This condition is worse than what the FCCPC has found it in its discreet surveillance.

The NNPCL seems to suggest that domestic refining does not guarantee lower pump prices. In a statement signed by the Chief Corporate Communications Officer, NNPCL, Olufemi Soneye, he said: “The pricing of petroleum products from any refinery, including the Dangote Refinery Ltd. (DRL), is determined by global market.”

That narrative has to change, if for instance, the domestic refinery is supplied crude locally and the cost of the feedstock is paid in local currency. In addition to high refining capacity, there’s no reason domestic pump price must remain what global market determines it to be.

Is that why NNPCL abandoned the four domestic refineries, because in their lazy thinking, whether crude is refined locally or not that would not affect domestic pump price? Yet, huge sums are voted yearly for endless turn-around-maintenance, together with workers’ salaries paid for doing nothing.

Domestic refining provides jobs and value addition. It guarantees energy security in a turbulent global market. What about other bye-products of refined crude that could supply other industries with raw materials?

What happened last week was a case of some cabal forcefully stepping in to ambush citizens at a time market forces were set to become friendly. With the DRL, costs associated with importation, including foreign exchange instability are expected to ease off gradually. Whoever set the new pump price is an enemy of the people. Nigerians were told to be patient for the light at the end of the tunnel. Now, the tunnel has been elongated.

The Nigerian Labour Congress (NLC) has accused government of betrayal on the new pump price. Labour claimed it agreed to N70,000 as a new minimum wage after reaching agreement with government that there will be no immediate increase. Labour ought to have known better than take this government into confidence. Even the new wage is yet to take off in states and the new petrol price will cause more hardship for workers.

If there was a modicum of sincerity in government, there should have been a stakeholders meeting, with workers’ representatives, particularly oil workers who are familiar with the industry, including energy experts to brainstorm and set a marketing template in this new era of local refining. It’s only fair that workers’ representatives must not be left behind at such sensitive meetings.

This is where the FCCPC will be useful, going forward. The Commission needs to focus more on policies of government that lead to inflation and unethical practices. In the Power sector, for instance, the Commission ought to query government for fixing costly tariffs for privatised energy companies. Even when generation capacity is too limited to provide electricity for most citizens, which should be government’s major headache, government is more interested in excessive billings from which it earns profit.

The implication is that retail outlets source their own energy to remain in business 24/7. Some big retail outlets have to be constantly on diesel engines. They source for water and provide their own security. At the end of the day, some of the costs are inevitably passed on to the consumer. It’s even worse for manufacturers, who have totally abandoned public power because it is too expensive. Some universities are rationing power. Others have been cut off for inability to pay. Appropriate energy pricing should bother FCCPC, because at the end of the day, the excess cost must be transferred to somebody.

Just as Mr. Bello noted, local production should come with reasonable gain, not outlandish and unbelievable profits. The local cement industry is one area government lacks the will to intervene and make prices affordable. Despite meetings with producers and promises to bring down the price, one bag of cement goes for N8,000. At such meetings, manufacturers table their problems, top of which is usually power.

A cement manufacturer, BUA Cement, announced last year it was crashing the price of one bag to around N3,500. But of recent, Chairman of Bua Cement, Alhaji Samad Rabiu, lamented that cement price remains high because of activities of dishonest middlemen. Maybe there are other details the cement manufacturer did not factor into the conversation. How can middle men be so powerful to make far more gain than the manufacturer? It is up to FCCPC to find out how middlemen have become more powerful and crooked.

But it shouldn’t be too hard for manufacturers to insist that accredited middlemen sell at a particular ex-factory price. It is also possible to print the price tag boldly for all to see. Nigerians would love to see the Commission take on big cartels who are often too big for the long arm of the law. Honest conversations between the FCCPC and major manufacturers could actually bring down prices far easier and more sustaining than peremptory sealing of traders’ outlets.

Sometimes, it’s ludicrous when certain actions of government are incongruous with what the government stands for. To seek to crash prices under a government that does not produce enough doesn’t look real.

On one hand, this government is seeking to increase VAT on goods and services to 10 per cent. If that happens prices of goods and services will go up. When interest rates are too high as they are here, prices go up. The layers of ports charges, multiple taxes in states and local governments are matters the FCCPC must take up with policy makers.

It’s true that the name All Progressives Congress (APC) connotes a little-to-the-left political ideology. Literally, that means the government is welfarist by design and inclination. President Tinubu campaigned to make life very easy for Nigerians, including bringing down price of petrol. Today’s reality however, is that harder times are here and there’s no mercy. Government has pushed an increase in price of the international passport. The police are forcefully pushing their e-CMR revenue earner. One hopes that the FCCPC is able to navigate its way through the maze of contradictions!