The Naira fell to 341 against the United States dollar at the parallel market on Thursday (May 12, 2016) from 321 following Wednesday’s removal of subsidy on petrol and the announcement of N145 per litre as the maximum pump price.
The local currency was trading at 199.40 to the greenback on the official interbank market, around the 197 official peg rate.
In announcing the deregulation of the downstream petroleum sub-sector, the Federal Government had said the decision became imperative in the face of extreme difficulties being faced by petroleum product importers in sourcing foreign exchange, adding that importers would henceforth be permitted to source for their forex requirements from secondary sources.
Interpreting secondary sources as the parallel market, an analyst at FBNQuest, Mr. Uwadiae Osadiaye, stated in a report on Thursday, “We expect increased pressure on parallel market rates to be a major fallout of this decision.”
The President, Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, in a telephone interview with one of our correspondents, confirmed the six per cent drop in the value of the naira on Thursday.
He said, “The fall is partly as a result of the demand from the oil marketers, because now they have to source their dollars for imports at the secondary market. So, that has really eaten the market up and people that are having dollar positions have started to draw back.
“If the pressure continues, and then, there is no any form of further deepening of the market by the Central Bank of Nigeria, I expect the naira to weaken to about 360 or 370 in the coming weeks. Let the CBN look at how they can really make the BDCs to perform their role of servicing the critical retail sector of the market.”
Also on Thursday, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, explained that the government could not provide foreign exchange for the importation of fuel as a result of the decline in earnings from crude oil sales.
“You cannot give what you don’t have. If you free up Nigerians to find sources of funds, they will find those secondary funds. They will import the product; the burden on the NNPC will reduce and the country will have peace and subsidy will go away permanently,” he said.
Meanwhile, the Nigeria Labour Congress has invited civil society bodies in the country to attend its emergency National Executive Committee meeting today (Friday) to discuss an appropriate response to the removal of subsidy on petrol.
The General Secretary, NLC, Dr. Peter Ozo-Eson, told one of our correspondents that the congress had written to the civil society bodies in Abuja and Lagos to be part of the NEC meeting and that they had agreed to the request.
Ozo-Eson said that the NLC had moved the NEC meeting it earlier called for Monday next week to deliberate on the 45 per cent increase in electricity tariff today (Friday) because of the unexpected removal of fuel subsidy.
The NLC’s scribe also denied the claim by Kachikwu that the fuel subsidy was removed after consultations with all relevant stakeholders.
He stated that the NLC, Trade Union Congress, Nigeria Union of Petroleum and Natural Gas Workers and Petroleum and Natural Gas Senior Staff Association of Nigeria were invited for the first time to attend a meeting at the office of the Vice President on Tuesday.
Similarly, the TUC is to hold an emergency meeting of its National Executive Committee today (Friday) to take a position on the subsidy removal.
The President, TUC, Mr. Bala Kaigama, and Acting, Secretary General Simeso Amachree, said in a statement on Thursday that the congress did not know how the government arrived at the new price of N145 for fuel.
The union leaders also wondered how the government came about the decision to allow market forces alone to determine the cost of petrol.
However, the Northern Elders Council has expressed support for the removal of fuel subsidy.
According to the group, the long-term benefits of the decision outweigh the short-term pains associated with it.
The Chairman, NEF, Alhaji Tanko Yakassai, said this in a telephone interview with one of our correspondents in Abuja on Thursday.
However, the Executive Director, Centre for Global Solutions and Sustainable Development, Mr. Adebowale Adeniyi, described the removal of fuel subsidy at this time as insensitive and sudden.
With the implementation of a new price band of N135 to N145 per litre for Premium Motor Spirit, the Federal Government will make profits from the sale of the product through the Nigerian National Petroleum Corporation filling stations across the country.
Checks revealed that many filling stations, including those belonging to the NNPC, had adjusted their pump price to N145 per litre, a development that prompted an increase in transport fares by at least 100 per cent in Lagos and Ogun states.
Some motorist, who spoke with our correspondents in separate interviews, described the hike in petrol price as unexpected and painful.
Meanwhile, the Petroleum Products Pricing Regulatory Agency, in a letter dated May 11, 2016 and addressed to marketers, said the minister had approved the implementation of an appropriate pricing mechanism for PMS.
It said some components on the pricing template were increased, with lightering expenses now N4.56 as against N2; Nigerian Ports Authority fee up from N0.21 to N0.84; NIMASA charge, from N0.15 to N0.22; financing, N2.51 from N0.64; retailers margin, N6 from N5; transporters charge, N3.36 from N3.05; dealers margin, N2.36 from N1.95; bridging fund, N6.20 from N4; and administration charge, N0.30 from N015; while the marine transport average remains at N0.15.
The removal of the fuel subsidy was greeted with a spike in transport fares in Yola, the Adamawa State capital.
The same situation obtained in Ogun State, as transport fares had been significantly increased.
For instance, a trip from Sango Ota to Abeokuta, which hitherto attracted between N250 and N300, had motorists paying between N400 and N500 on Thursday. Similarly, a journey from Oju Ore to Sango, which used to attract N50, had increased to N70.
Instead of reducing the long queues of motorists at filling stations, the increase in the pump price of petrol worsened the situation in Abuja and neighbouring states on Thursday.
However, the National Orientation Agency urged Nigerians not to take undue advantage of the removal of subsidy to inflate the prices of goods and services.
The Acting Director-General, NOA, Mrs. Ngozi Ekeoba, who made the call in a statement made available in Abuja on Thursday, also urged Nigerians to show understanding and cooperate with the government.