Dear Subscriber,
Is PMS Price Deregulation for Real or Is It Just a Mirage?
The deregulation of the downstream petroleum sector and the removal of subsidies on refined products especially PMS has been a subject of controversy in Nigeria for ages. When in Q1 the FGN finally announced the approval of the deregulation process, many analysts and the markets took it with a pinch of salt. Then in April 2020, the price of PMS was allowed to slide (N123.5/liter) in line with the fall in crude oil prices ($26.63pb) and Nigerians were pleasantly surprised.
The true test of deregulation is when crude prices trend upwards and price of petrol is adjusted in line with market forces. The question on everyone’s lips is that “do we have true deregulation or is it just reform rhetoric and playing to the gallery?”
The negotiation with labor unions and stakeholders on price determination is not part of a deregulated market. Presently, with crude prices at $49pb there is no way you can justify a pump price of N162/liter. The price needs to be a product of crude petroleum price, exchange rate, refining and transport costs.
CBN Rolls the Dice to Tackle Market Liquidity and Dollar Scarcity
The CBN through a rash of circulars has intensified its efforts to address money supply growth, rising inflation and forex scarcity. The apex bank introduced special bills which will serve as an additional tool for liquidity management. This should lead to a more efficient financial market and possibly push the outrageously low interest rates higher. It may also taper inflationary pressures as money supply growth begins to decline in the near term.
The new guidelines on Diaspora and other remittances allow beneficiaries to receive their inflows in foreign currency. This is expected to encourage inward remittances and thus increase forex supply. Increase in forex liquidity is the much needed boost to avert currency volatility and strengthen the naira against a basket of other currencies, particularly the US dollar.
In this edition of the FDC Bi-monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.
Enjoy your read!
