The current hike in fuel price signals a need for the local refinement of oil products

On the 11th of November 2020, the Petroleum Products Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) released an internal memo announcing an increase in the ex-depot price of fuel, to N155.17 per litre from N147.67 per litre.

The ex-depot price is the price at which the product is sold by the PPMC to marketers at their various depots. Consequently, marketers would be dispensing the product to motorists within a band of N165 and N173 per litre.

As expected news of further increase in the price of fuel was met with a lot of negative reactions. Nigeria is currently battling with a high rate of inflation in the commodities market, adding this to the equation just brings a huge level of discomfort to citizens of the country.

However, there is a big question that keeps creeping up anytime this happens and that question is; why is Nigerian not refining its own petroleum products? Part of the issue the country is facing today is the lack of proper functioning refineries. Crude oil though present in Nigeria is exported to foreign countries to be refined, then imported back into the country at a higher rate.

In the year 2020, Nigeria seems to be like an individual repeatedly failing a class even after being given the answers to the required test for promotion.

This obvious need for Nigeria’s own refinery was also recently highlighted by the Lagos Chamber of Commerce and Industry. In an interview with the News Agency of Nigeria, Director-General of the Chamber, Dr. Muda Yusuf explained that accelerated domestic refining and processing of petroleum products would end the unstable petroleum pricing in the country.

This move will obviously prevent the deregulatory policy from being derailed as well as prevent a return to the corrupt subsidy regime.

Furthermore, a shift to local refinement of oil products has to be ushered in by appropriate structures and a level playing field in the current regime of deregulation. This is because the current supply structure by the NNPC is a monopolistic one which makes it almost impossible for the economy to benefit from the positives of deregulation.

A level playing field will lead to a competitive market framework which will then lead to a positive impact from deregulation and the icing on the cake for all of these is the approval of domestic refinery of oil products.
It is unfortunate that the authorities of the country are not paying attention to this, because it will help ease a lot of challenges the country.

A better crude extraction and refinement sector will ultimately affect other sectors of the society and thereby lead to a healthier and buoyant economy.

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