Saturday, May 14, 2016

A good thing happened

The federal government announced an end to the fuel subsidies, and thus changed the official price of petrol price from N86.50 to N145 (maximum?) per litre.  Some, NOT all, people are happy with this price increase.
We may face strikes in the coming week in protest of the new price regime.
But considering that for months Nigerian consumers have been paying more than N150/liter in painful conditions for the same, we might as well call the price what it is and hope for progress.

How badly are we doing at the pump?
The price of crude oil crashed - worldwide - in 2014, leading to lower pump prices in Kenya, cheap gasoline in the USA, - both countries now have about 30% lower petrol prices than in late 2014 as logic may predict, ... but in Nigeria, we see the opposite effect: prices have gone up 50% ...
2011 - 2016 price charts for crude oil -
On the other hand, Saudi raised its super-low pump price about 50% too, and we Nigerians don't pay more for fuel than the typical (non-oil-rich) country.   

Criticism of the latest petrol (PMS) subsidy-removal policy -
1. Inflation and hardship, but we've seen the worst of those anyway
2. Low local refining capacity means we still import fuel with basically the little money we've got from exporting crude oil and will remain poor unless we change things.
On the other hand, some would argue that
3. We should have done this a long time ago. 

The federal government should now end the currency subsidy.  The dollar is priced at about 350 Naira, even if the official rate remains under N200. 

Get UpNaira email updates.
Order Big Girl and Big Boy.


t said...

Simon Kolawole is very articulate. You should read him.
The Price of Delayed Adjustment in today's ThisDay

Anonymous said...

also Venezuela

t said...

The reason I want to cry today is that we thought a subsidy removal was announced, but today we think it was just an announcement of a price increase - that is, we have not even fixed anything. With oil prices low today, we have elevated pump prices (something's wrong with that picture.) Should oil prices rise on the market or the inputs become more expensive, we'll be back to raising prices at the pump and spending massively on subsidies. We lose, lose, and lose. Is there fraud here? I think it's certain. I'll assume it's campaign money.

We thought a currency float was announced too, but now it seems it wasn't really, even though it was.

Just like that time in China with the currency swap idea, but there was clearly no amount and no swap contract, so there was no swap?

This is horrible and we are setting up to be empty-food-cupboard Venezuela (hungry, no food). For nothing.

Previously on UpNaira