Page 6 - DMEA Week 11 2021

DMEA COMMENTARY DMEA

Nigeria, Kenya hike fuel prices

Both countries are responding to rising crude oil prices,
but their decisions have different policy implications

AFRICA THE fact that petroleum product prices are ris- shortage. Nigerian drivers have been experi-
ing in many countries is not surprising, given the encing more difficulty in finding fuel in recent
state of world crude oil markets. weeks, and queues at filling stations have been
WHAT: After all, oil prices have risen significantly growing increasingly long. At the same time,
Nigeria’s PPPRA and since the start of the year, with West Texas Inter- local press sources have been reporting that
Kenya’s EPRA have hiked mediate (WTI), the main US benchmark, rising wholesalers and depot owners in Lagos, Abuja
fuel prices. from $48.25 per barrel as of January 1 to just and other cities were stockpiling fuel in the
under $65.00 as of earlier this week. Brent crude, expectation that the government would raise
WHY: the main European benchmark, has also gained prices.
The Nigerian agency’s momentum, climbing from $51.80 per barrel as Even so, most Nigerian filling station oper-
decision has been rolled of January 1 to more than $68.00 per barrel as of ators were not anticipating any major changes
back by NNPC, while earlier this week. to the official pricing regime in the near future.
EPRA’s decision is likely Not surprisingly, higher oil prices have driven After all, state-owned Nigerian National Petro-
to stand. up the cost of the fuels made from crude. This leum Corp. (NNPC) pledged publicly on March
may have been a logical development, but it 1 that it would not push costs above NGN200 per
WHAT NEXT: has garnered a number of visceral responses. In litre ($0.52) in the month of March.
The passage of Nigeria’s Nigeria and Kenya, for example, government On that date, NNPC, which regulates the
new oil law could make agencies’ announcements of fuel price hikes have country’s fuel markets and also has a monopoly
the dispute between drawn harsh criticism. This article will examine on petroleum product imports, said in a state-
PPPRA and NNPC recent developments in these two countries. ment that it “was not contemplating any raise in
irrelevant. the price of petrol [gasoline] in March in order
PPPRA proclamation not to jeopardise ongoing engagements with
In Nigeria, the trouble began late on March organized labour and other stakeholders on an
11, when the Petroleum Products Pricing acceptable framework that will not expose the
Regulatory Agency (PPPRA) revealed that ordinary Nigerian to any hardship.” The state-
it was raising the pump price of gasoline to ment quoted Kennie Obateru, the group gen-
NGN209.61-212.61 ($0.55-56) per litre for the eral manager of NNPC’s public affairs division,
next month. The agency also said at the same as saying specifically that there would be no
time that it was setting ex-depot prices for gaso- increases in ex-depot prices for gasoline.
line at NGN206.42 ($0.54) per litre and landing Nevertheless, the price hike was rolled out
costs at NGN189.61 ($0.50) per litre. on March 11. The very next day, NN% pub-
At the time of this announcement, most of lished a statement reiterating its pledge not to
Nigeria’s filling stations were selling gasoline raise fuel costs in March. And later on March 12,
for about NGN162-165 ($0.426-0.434) per the Major Oil Marketers Association of Nigeria
litre. As such, PPPRA’s move seemed to herald (MOMAN) and the Independent Petroleum
an upswing of around 27-31% in retail gasoline Marketers Association of Nigeria (IPMAN) said
prices. they had received confirmation from NN% that
This may not seem like an unreasonably large prices were not slated to go up.
price increase, given that world crude oil prices Clement Isong, MOMAN’s executive secre-
have also been rising, as noted above. (WTI tary, told the Nigerian press that he expected the
prices have climbed by more than 34% since Jan- state-owned company’s reassurances to settle
uary 1 and Brent prices by around 31% during concerns about possible supply shortages. “What
the same period.) Nevertheless, many Nigerian NNPC did was to take out the speculation by giv-
observers have reacted with anger to the news. ing assurance that [the gasoline] price will not
For example, a new activist group known as the go up in March, and that killed the queue and
National Consultative Front of National Leaders demand went down,” he was quoted as saying by
of Conscience (NC Front) has accused the fed- NAN. “What they have done again this morning
eral government of colluding with fuel marketers is to take out the speculation out of the market.
to change policy in a way that was sure to impov- They always have enough products.”
erish ordinary consumers. As of press time, it was not clear whether
Nigeria’s federal government had weighed in on
Criticism and confusion the matter. Even so, NN% seems to have won the
Some of this frustration stems from consumers’ day. It responded swiftly and harshly to reports
rising concerns about the possibility of supply that some filling stations had raised their retail

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