By Pathfinder Reporter
Thursday September 12, 2024
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The International Monetary Fund (IMF) has urged the Federal Government of Nigeria to further review upward the price of Premium Motor Spirit, otherwise known as petrol.
The Resident Representative of the IMF in Nigeria, Dr. Christian Ebeke, hinted on Arise TV on Wednesday that petrol is still selling below market price, indicating the possibility of a further upward price movement.
Recall that the Nigerian National Petroleum Company Limited, NNPCL, has also taken a similar position.
The IMF executive expressed worry that Nigerians are going through significant hardship due to policies being implemented by the present Federal Government.
Ebeke stated: “I think this upward adjustment of petrol price at the pump comes at a time Nigerians are already feeling significant hardship.
“There is a lot of pain for Nigerians coming from multiple shocks, compounded shocks, including high inflation, high food inflation. Now, the country is dealing with devastating floods, among others.
“So the upward adjustment to pump rice comes at that particular moment when the economy is also dealing with multiple shocks and Nigerians are feeling this pain.
“I would advise that as we clearly stated in our annual review of the Nigerian economy which we published in May and our advice is very clear.
“It is important to strengthen social protection in Nigeria. It is important to accelerate the mechanism and the disbursement of this support to the most vulnerable so they can cope with the multiple shocks they are facing now.
“The program the Federal Government has is reaching out to 15 million households; this is the way to go. This program should be accelerated; cushioning the impact of the pump price policy on the most vulnerable is the immediate priority.
‘NNPC fuel prices are not market-reflective’
Supporting the earlier position of the NNPCL that the current pump prices of petrol were not yet market reflective, Ebeke said: “I think the starting point should be to ensure that there is enough supply stability of this product. The queues that we see at gas stations need to be addressed.
“We also understand that for a long time, price at the pump has not been reflective of market conditions and this led to challenges to petrol supply and challenging situation also falls for NNPC.
“So our position again is while you are making these adjustments, it is very important to be mindful of the potential impact these have on the most vulnerable. Again, the narrative should be about how to accelerate support to the most vulnerable, so they can cope with this type of shock.
“Now, if this upward adjustment brings enough supply in the market and addresses fuel scarcity, this will be a very good development for many Nigerians because the scarcity is not helping the productive capacity of the country, and also with this situation, people normally don’t get a life”
Ebeke also expressed the view that the controversy surrounding the earlier claims that NNPCL would be the sole distributor of Dangote Refinery petroleum products was better resolved in favor of consumers if availability and competition were in place.
He stated: “Availability of supply, competition, those are principles that usually work in favor of consumers. They bring good product quality when you have competition, and when you have competition, you ensure that there will be stability of the supply in the market.
“Again, everything that works in favor of those principles is something we will welcome, and the market should be a market where the two principles are achieved.
“Stability in supply with competition will ensure that consumers can have the best deal and the best bargain.”
Reacting to the position of the Federal Government that despite the hardship on the citizens, its economic reforms were necessary for sustainable growth, Ebeke stated: “A constant topic and theme here for us is about how you balance policy.
‘’When it comes to this type of challenging reform, you have to look at them as packages. You have a package where the first leg has a clear mechanism to discuss or implement a price modulation for this type of product like petrol, but you don’t do it just alone.
“Then you have to blend this first pillar with another one, which is how you cushion the impact on the most vulnerable.
“So the price adjustments or any effort you are making to resolve the balance sheet problem should be accompanied by something meaningful to the people.
“That is why we see this as a package of policies in the recommendations contained in our annual economic review of the Nigerian economy in May. It clearly stated that those policies should be implemented as packages.
‘’So you have these price modulations that you can design and have a clear and transparent framework for price determination for petroleum price at the pump and also have a robust social safety net program or a mix of programs that targets the most vulnerable, so they can cope with the multiple shocks they face now.
Ebeke also took a look at the end-of-year position of Nigeria’s economy and the 2025 insight, stating: “I think, maybe three points here. First, the authorities have an ambitious plan to transform the economy, restore market stability, promote growth, and deal with poverty.
‘’This is the ambition. We have clearly stated it. It’s an impressive and very ambitious plan they have. Meanwhile, there is also a recognition that there is significant hardship in Nigeria. The population has to deal with multiple shocks, and those shocks are not just one after the other; they’re also compounded.
‘’Clearly, there is a need right now to continue all the efforts to reach out to the most vulnerable and ensure that while the reforms are being rolled out, those vulnerable can be reached out to, and, the administration can help them cope with the challenging situation they face.
‘’I think programs like the one the Federal Government has, reaching out to 15 million households, providing direct payments, supporting with CNG buses, plans that hopefully will be implemented soon, and additional plans, providing grains, using strategic agricultural reserves to reach out.
“This is very, very important, and those types of initiatives should be accelerated to ease the pain on Nigerians.
“Now, going forward, one of the key issues for Nigeria has always been the revenue part. You can have all the plans, but how do you finance those plans? So, raising revenue in a country that has one of the lowest revenue-to-GDP rates in the world is one of the ultimate priorities for now and also in the medium term.
“Again, why are revenues important? Because you will use them to promote more infrastructure, more development spending, more health, more education spending. So that’s how we see the type of challenges, but also opportunities for the Nigerian economy.
“Now for the remaining part of the year, one of the keys, I would say milestone, or something you can put in the calendar, is the 2025 budget.
‘’This budget will also set the stage for what would be the priorities for the administration for 2025, given all the challenges and also how to create the opportunities to ensure that macro stability is restored and also growth is promoted, going forward.”
Reactions:
Reacting to IMF concerns on the effect of the reforms, Clifford Egbomeade, Public Analyst/ Communications Expert said: “IMF’s statement about the pump price of petrol not being market-reflective points to a familiar challenge in the country’s economy.
“Over the years, fuel subsidies have been a contentious issue as they significantly strain government resources, but they also serve as a buffer against the high cost of living for ordinary Nigerians.
“While IMF’s call for market-reflective prices aligns with economic sustainability, it’s important to recognize that many Nigerians rely heavily on petrol, not just for transportation but also for small-scale businesses and power generation.
“Any hike in fuel prices without adequate cushioning mechanisms could worsen economic hardship, especially in a country where inflation, unemployment, and poverty are already pressing concerns.”
On the advice for social nets, Egbomeade said: “The emphasis on social safety nets for the vulnerable population is the right direction, but implementation will be key.
‘’For this to work in Nigeria, the government must first ensure that programs aimed at protecting the vulnerable are transparent, adequately funded, and well-targeted.
‘’If not properly handled, Nigerians could lose faith in both the subsidy removal and the promised social protections.”
A major challenge with the economy is the failure of policies — Olayinka
In his reaction, Tajudeen Olayinka, Investment Banker & Stockbroker, said: “ IMF is right with its advice to the government, but the major challenge with the economy is the failure of policies, which is making it difficult for the economy to be on the right path to adjustment.
The economy is simply not adjusting because the program is not well coordinated with the right set of required policies, programs, and structures.
‘’Unfortunately, the economy cannot recover from the current crisis without taking it through a well-coordinated adjustment program. Adjustment Program is about the most complex program in macroeconomic management.”
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