Expert faults govt for failing to shield Nigerians from global oil market shocks 

There has been a reported hike in the price of fuel in Nigeria as a result of the fluctuating price of crude oil in the global market.

In an exclusive interview with Naijaonpoint, Zakka explained that retail prices of petrol in Nigeria respond to crude oil prices in the international market which is traded in US Dollars, because Nigeria does not make consideration for its citizens in both crude oil production and refining. 

He explained that most of Nigeria’s oil production is exported or sold for revenue generation, while nothing is refined by the government for citizens’ consumption. 

In simple terms, Nigeria sells all its crude oil to both local and international refineries based on international prices; the refiners sell refined products to marketers also based on international prices.

So, citizens are at the mercy of trends that affect the international market. 

Bala explained: “It depends on the angle somebody is trying to talk about. If you are talking about benefits to the country, we will look at it from one side, when you cascade it down to the citizens, it is a completely different thing. As a country that produces crude oil, generally, when you produce a product and you sell it, you are supposed to earn what we call revenues. 

“But the common currency of interaction or transaction is the US dollar. So, the quantity of crude oil that Nigeria sells to the international market is basically for revenue generation. Ordinarily, Nigeria is supposed to have the capability to produce crude oil for internal consumption. 

“The crude oil you produce for internal consumption is not supposed to be tied to the international price. It has no relevance to the international price. And it is not being controlled by OPEC.” 

Bala further explained that Nigeria’s state-owned refineries are not working. Therefore, all of Nigeria’s crude oil is sold to international or private refiners. 

He said: “Nigerian state-owned refineries are not working. And the only way Nigeria makes money is by selling crude oil. And because Nigerian state-owned refineries are not working, what Nigeria does is, whatever Nigeria produces, Nigeria sells or pumps into the international market. Then Nigeria buys refined petroleum products. 

“The reason it affects us is because those countries or those refiners that we are buying from, they are buying from the international market. They are buying at the price of the international market. So, when they buy and they want to sell and they put their margin, so long as we are buying from them, if the price is high – they buy at a higher price, and they process at a higher price – they will sell it at higher prices. 

“But if you have the state-owned refineries in your own country and they are working, and the volume is not dictated by OPEC, you can decide to sell a litre of petrol for N10. You don’t owe anybody any explanation.” 

Naijaonpoint reported that the federal government claimed it had refurbished two state-owned refineries – the Port Harcourt and the Warri refineries, which have a combined capacity of over 200,000 barrels per day. 

However, with the deregulation of the downstream sector, if the refineries start producing, they would still be subjected to international prices. 

In an exclusive chat with Naijaonpoint, the Chief Corporate Communications Officer of the Nigeria National Petroleum Company Limited, Olufemi Soneye admitted that the refurbished refineries do not guarantee a reduction in the prices of fuel and diesel. 

In an exclusive chat with Naijaonpoint, the Chief Corporate Communications Officer of the Nigeria National Petroleum Company Limited, Olufemi Soneye admitted that the refurbished refineries do not guarantee a reduction in the prices of fuel and diesel. 

“The refurbishment of our domestic refineries may contribute to a partial reduction in prices. However, pricing is influenced by several factors, including international benchmarks, which are largely determined by seasonal trends and priced in U.S. Dollars. Therefore, the Naira-to-USD exchange rate remains a significant determinant of pump prices,” Soneye said. 

Subjecting Nigerians to fluctuating international oil market exposes govt’s failure 

Dr Zakka argued that the government subjecting Nigerians to global trends and international crude oil benchmarks exposes the government’s failure and lack of responsibility to the citizens. 

He said it is the responsibility of the Nigerian government to ensure energy security for citizens and ensure that citizens enjoy the dividends of revenues from crude oil. 

“If you go to a place like Saudi Arabia or Libya in the days of Gaddafi, they are not experiencing it like this. If you go to Malaysia or Iran, where they have state-owned refineries, the quantity they sell to the international market has nothing to do with what they supply to their citizens,” he argued. 

He compared the situation to a poultry owner quoting the market price of chicken to his children whenever they wanted to eat chicken.

He described it as “abnormal” and “unfortunate”. 

“Every time your children want to eat chicken, you will be telling them, do you know the price of chicken in the market? You don’t do that! Government is to citizens what parents are to children.” 

What you should know