As presently constituted, the real investors in the infrastructure for importation of fuel is largely geopolitically defined. This current deregulation will favor Yorubas and Igbos. They both have the infrastructure and wherewithal to benefit from this largess.
On a general note, if you remove subsidy and still fix price (N145 naira), then it’s called partial deregulation. It’s usually done on essential commodities, and its power is derived from the consumer protection act.
Fuel is an essential commodity; everyone uses it. Same can’t be said of telecoms. If the Buhari led administration has deregulated the oil sector without fixing price, fuel may sell for N2000 naira liter! Remember what happened in telecommunications sector?
The harshness alone will be too unbearable and mass protests and civil unrest will happen. With Boko Haram in the North, Fulani herdsmen in the middle belt, OPC in South-West, IPOB and Biafra in South-East, and Niger Delta Avengers in the South-South, this government will collapse. Nigeria may even disintegrate.
If prices hadn’t been set, inflation will sky rocket and living conditions will be fantastically unbearable.
In all of this, oil marketers will have seek for forex in order to fund fuel importation. In reaction, PPPRA loosened its grip on oil dependent forex by rebasing exchange rates of N298 to the dollar. Since oil is our major source of income, the Buhari’s led government will have no choice than to devalue the naira.
Simply put, dollar will exchange for $1 to 400 in the near future! As news on fuel subsidy removal filtered in, the naira lost value selling for $1 to 341 naira. It will continue to go down!
The CEO of Financial Derivatives Company Limited, Mr. Bismark Rewane, said “If they (CBN) say they can’t fund importation of petrol from the official market, then why do we have that market? What they have done is to effectively devalue naira for petrol imports.
“But the government cannot push the funding of petrol to the parallel market because the market does not have the depth to fund the importation of petrol. What we will see is a situation where the NNPC will be selling petrol at a different price while other marketers would be selling at a different rate, thereby creating a dual exchange rate regime.
The real game changer in this partial deregulation is that new investors will register their interest and participation in the fuel importation business. The policy change also suggests that the PPPRA would have to monitor crude oil prices and forex rates at the parallel market.
So Nigerians should brace up for a harsh economic climate. However, we do hope that market forces will take over, drive down cost of fuel, increase the value of naira and better or lot.
We only hope it does.