Nigeria hikes fuel price by 67%

Nigeria’s government raises fuel prices dramatically as the oil slump hammers state income.

Lagos - Nigeria's government raised fuel prices by 67 percent and urged the central bank to adopt a more flexible currency policy to spur investment, top officials said on Wednesday as Africa's largest economy battles its biggest crisis in decades.

A fall in global oil prices has hammered state income, caused dollar shortages and halted infrastructure projects in Africa's top oil exporter with firms laying off tens of thousands of workers.

Oil Minister Emmanuel Ibe Kachikwu said petrol stations could charge as much as 145 naira ($0.73) a litre gasoline, up from 86.5 naira before, a move that will help the government to cut subsidies it has been providing to pay for fuel imports.

But hours after the announcement, the Labour Union Congress, which represents workers across sectors, said it would resist the hike, which came into effect on Wednesday.

‘Height of insensitivity’

“The unilateral increase in prices of petroleum products today by (the) government represents the height of insensitivity and impunity and shall be resisted by the Nigeria Labour Congress and its civil society allies,” it said.

“The latest increase is the most audacious and cruel in the history of product price increase,” it said in a statement.

In another bold move, Vice-President Yemi Osinbajo called on the central bank to undertake a “substantial” review of its foreign exchange policies to overcome dollar shortages and address investor complaints about a high naira rate.

“This would help boost foreign exchange supply and encourage capital inflows and a free flow of remittances,” he told a business forum in Lagos. “Very soon we will see a more flexible approach,” he added, declining to go into specifics.

The central bank has imposed hard currency curbs and frozen the naira rate to the dollar, which has hit investment as foreign firms expect Nigeria to devalue the currency anyway at some point due to a slump in oil revenues.

Asked whether Nigeria needed to devalue the naira currency - a move so far objected by President Muhammadu Buhari - Osinbajo said that “there is an ongoing debate” in government circles but that it was too early to say whether such a move made sense.

“There has been a sharp decline in foreign exchange earnings. The executive is not responsible for monetary policy but we have made the point clearly that demand management will not take us out of the woods,” he said.

The naira has fallen 40 percent below the official rate on the parallel market where firms go to get hard currency to fund their imports.

Osinbajo also said the government would do “anything” to help banks survive the downturn.

Fuel prices

The West African country tried to end fuel subsidies in 2012, doubling the price of gasoline overnight, but later reinstated some of the subsidy to end a wave of strikes called in protest.

In a new initiative, the government will also allow fuel importers to get dollars from sources other than the central bank, Kachikwu said in a statement. The rate for importing fuel would then be reflected in the pump price.

Nigeria has for years set a cap on prices for fuel sold at home and paid importers the difference via subsidies. But in its 2016 budget, the cash-strapped government did not allocate any money for the subsidies.

Raising fuel prices is sensitive, because many Nigerians see the subsidy as the only benefit they derive from living in Africa's top oil producer which is gripped by graft and poverty despite its energy wealth.

Nigeria imports almost all its gasoline because its refineries have been neglected for years.

REUTERS