By Patrick Oludare
The citizens of Nigeria are going through a very unpalatable and unprecedented economic hardship at the moment. The huge problems of skyrocketing inflation, worsening standard of living, hunger, and especially food prices’ inflation are the causes of suffering of Nigerians.
The policies of government have ignited a major crisis in the economic situation of the country through devaluation of the Naira and removal of subsidy.
The payment of subsidy to oil markerters for the year 2023 reportedly cost the government N6.72 trillion
In 2024, the Nigerian government says the landing cost of petrol is N1,200. If subsidy is completely removed, consumers would pay about N1200 to buy fuel. This is unaffordable for many Nigerians with rapidly declining purchasing power.
Nigeria’s oil production has also risen to N1.6 million barrels per day according to the speech of the President who is also the petroleum minister.
The Nigerian National Petroleum Corporation (NNPC) is the sole importer of petrol and petroleum products to Nigeria, and sells petrol to oil markerters.
The sale of N1.5 million barrels of oil per day would yield a yearly revenue of about N70 trillion.
A barrel of crude oil is 159 litres that contains 73 litres of petrol, 36 litres of diesel, 20 liters of aviation fuel, six litres of propene, and 34 litres of butane, asphalt and sulphur.
About 300,000 barrels of crude oil would produce the petrol that satisfy the daily consumption of petroleum products such as petrol, diesel, aviation fuel and kerosene in Nigeria. 300,000 barrels of crude oil per day for 365 days is equivalent to N14 trillion at the current market price of $80 per barrel.
If the Nigerian government decided to set about 300,000 barrels of crude oil apart and sell it at the rate of 1 dollar per barrel to an oil refining company, it would help the company to reduce its refining cost of production. The price of crude oil is what determines the cost of petrol in countries globally.
A cheap crude oil means cheap petrol, cheap diesel, cheap kerosene, etc. Selling crude oil at 1 dollar, and then importing the fuel produced from 300,000 barrels of crude oil into Nigeria would give a steep, sharp fall in the prices of petrol, diesel, kerosene, aviation fuel, etc.
The price of petrol would fall to N15 per litre instead of the N1,200 per litre. Price of diesel will similarly drop from N1,000 per litre to N12.5 per litre. Kerosene price from the current N1,550 per litre to N19 per litre. Aviation fuel may be reduced to N15 per litre from the current price of N1,200 per litre.
It may surprise many but the principle of energy prices is that the fall in the retail price of a petroleum product leads to fall in the price of other petroleum products.
Fall in price of petrol and diesel would stimulate the production capacity of industries and significantly resuscitate businesses, because manufacturing industries would use diesel as source of energy.
It would transform all sectors of the economy. The cost of living for Nigerians would reduce immensely.
A lot of citizens would be happy because they would be able to buy cheap food and cheap goods. Jobs would be created for many and many citizens can establish their dream startups and business.
This would enable the citizens to produce enough goods and services for local consumption and exportation to foreign nations.
A positive consequence of fall in energy prices is the increase in the value of the naira. The national exchange rate will be strong because there is possibility of one dollar to be exchanged below N5
Nigeria would be on the upward and growth direction till it becomes economically buoyant and can then be regarded as a global economic player.
* Mr Oludare, an economic expert, writes from Akure, Ondo State, and can be reached via oludarepatrick92@gmail.com