By Omodele Adigun

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Experts seem to be at loggerheads on the likely impacts of the new regime of fuel prices announced by the Federal Government Wednesday. While some saw it as the beginning of good things to come, others expressed fears that it might be the beginning of the end to the change for better that Nigerians have been yearning for.
According to Mr. Taiwo Oyedele, Partner, Tax & Regulatory Services at PricewaterhouseCoopers(PwC), the new Premium Motor Spirit (PMS) prices may shoot up prices initially, but in the medium to long term, things would simmer down. He, however, expressed fears that the nation might lose the gains of the deregulation of the downstream sector of the economy if not handled well.
His words: “I think the key issue is whether the Wednesday’s announcement is a full deregulation or modified price modulation given the price cap introduced. If deregulation is not properly done, the country will experience the pain of the so- called deregulation without maximising the gains such as building investor confidence to attract investments.
“According to the NBS (National Bureau of Statistics), the price range for PMS in the past month was about N130 to N200 per litre. To a large extent, this higher cost has been factored into pricing of transportation and related goods and services. While prices may go up as a result of this announcement, in the medium to long term things will normalise. It is not different from the diesel experience, which is deregulated but still within reach. The cost of scarcity, and subsidy corruption far outweigh any benefit from price regulation.”
But for Barrister Chukwuemeka Eze, a Lagos-based legal practitioner, Nigerians should brace up for hard times ahead as elastic inflation would spring up and stare them in the face; cost of doing business would skyrocket and more people would commit suicide.
He said: “The fuel price increase will result in hyper inflation, increased interest rate, reduction in purchasing power, downsizing of personnel, scarcity of goods and services, increased capital flight, emigration by increasing number of Nigerians and general disenchantment by the populace. I suspect that this new price template may work in Lagos and Abuja. Fuel may sell for up to N250 per litre in other parts of the country. The Ease of Doing Business Index of Nigeria will drop further. Manufacturing will become non-attractive. More people will commit suicide while more people will rely on spiritual healing and security. Crime rate will soar. The society will be in a flux for some years to come.”
Indeed, inflation rate in March shot up to an over three-and-half-year high. The consumer prices increased by 2.2 per cent over the previous month, which was a notch below February’s 2.3 per cent increase. According to NBS, the month-on-month increase mainly reflected higher prices for imported food, housing, water, electricity, gas and other fuels as well as for food and non-alcoholic beverages.
Details show that the March inflation figure jumped from February’s 11.4 per cent to 12.8 per cent. This represented the highest rate since July 2012 and overshot the 11.8 per cent that market analysts had expected. As a result, annual average inflation ticked up from February’s 9.4 per cent to 9.8 per cent in March, thereby reaching a nearly three-year high.
‘Core consumer prices, which exclude farm produce and energy prices, rose 1.6 per cent in March over the previous month, which matched the result tallied in February. Core inflation jumped from 9.5 per cent in February to 10.3 per cent in March.’
The NBS expects inflation to end the year at 10.2 per cent and at 9.5 per cent in 2017.
Before the subsidy removal, the fuel scarcity, which has been on for close to four months now,  really dealt a hard blow on  foodstuffs. Findings showed that prices of virtually all foodstuffs have gone up, especially in the areas worst hit by the scarcity in Ogun State and  its  environs.   For instance, a bag of rice that used to sell for between N7, 000 and N8, 500 now goes for about N13, 500, while for beans (Oloyin and drum brands) a Derica (can) measurement is sold for N220 and N190  as against N150 and N180 respectively. Groundnut oil now goes for N2, 500 for five litres, as against N1,500, while a bottle of palm oil is selling for N350 as against N150.
Traders who spoke to Daily Sun said the rising costs of the commodities, especially tomatoes, peppers and onions were attributed to the high costs of transportation and current fuel scarcity. In Ijegun Market, Satellite Town, a bucket of tomatoes, formerly sold for N400, now sells between N700 and N800.
Similarly, a bag of onions, sold for between N4, 000 and N5, 000, now sells for between N7, 000 and N8, 000.
In Agboju Market, a basket of pepper, formerly sold for between N 1, 500 and N2, 500, now sells for N4, 000. Also, a bag of garri, formerly sold for N5, 500 now sells at N9, 000.
Mustafa Abdullahi, a meat-seller at the Ijegun Market, told Daily Sun that the high cost of meat was due to the fuel scarcity, which brought about increase in transportation fare. “Prices of the meat have gone up because of the high demand for them and the high cost of transportation from Northern Nigeria. The truth of the matter is that the prices will remain like this until the issue of petrol scarcity is resolved,” he said.
Mrs. Precious Ndubuisi said that the hike in food prices was alarming. “Increase in the prices of food items is getting worse by the day and that should not be but the traders are complaining that fuel scarcity is not helping matters. The government should do something about the fuel scarcity, otherwise very soon, people will go to market and will not be able to buy anything,” she said.
Another  trader from Iyana Iba Market, Mr. Ikem Amaefuna,  said fuel scarcity had affected the movement and prices of goods to the market.
He said: “The numbers of trucks that bring goods to the market have dropped drastically. We only get two or four trucks now from the 10 trucks that usually bring goods to the market daily because there is no fuel to transport the goods to Lagos.”
As for the negative effects of the fuel crisis on business generally,  Mr. Nnamdi Okafor, the Managing Director of May & Baker Nigeria Plc, noted that the cost of doing business in Nigeria is very high. “To provide power, we spend about N350 million every year; just to provide electricity for our plants to run. In advanced countries, even in some other developing countries, they are the things you take for granted.” Maybe that is the reason most foreign investments are winding down. This is evident in the stock market, which lost N332 billion under two months.
The loss partly may be attributed to foreign portfolio investors (FPI) pulling their money out through profit taking or outright divestment, as they adjudged the business terrain in the country inimical to investment.
Data from the Nigerian Stock Exchange (NSE) put the amount lost in March alone at N177billion, up from the N155billion lost since the fuel scarcity started in February.
The fuel scarcity started mid-February across the country and worsened over time. Statistics, however, shows that at the end of trading on February 12, the second week of the month, the market capitalization, which measures the value of equities at the Exchange, stood at N8.491trillion, while its twin indicator, the All Share Index, that tracks the equity performance, closed at 24, 689.69 points. The duo depreciated to N8.336trillion and 24, 228.79 points respectively at the end of the month.
The trend also continued in March. The market capitalisation, which opened the month at N8.882trillion, plummeted to N8.705 trillion at the end of the month. On the other hand, ASI, dropped to 25, 306.22 points from 25,820.10 with which it opened the month.
As for participation by both local and offshore investors, domestic investors significantly outperformed foreign investors by 27.04 per cent. The total transactions at the nation’s bourse increased by 39.44 per cent from N84.10 billion recorded in January  to N117.27 billion (about $0.60 billion) in February. In comparison to the same period in 2015, total transactions decreased by 36.44 per cent from the N184.49 recorded in February 2015.
Domestic transactions increased from 48.43 per cent in January  to 63.52 per cent in February 2016, while FPI transactions decreased from 51.57 per cent to 36.48 per cent over the same period.
This might not be connected with some investors that divested their stakes. Portfolio investors, including Aberdeen Asset Management Plc and Ashmore Group Plc, which, together, oversee about $450 billion of assets, retreated from the Nigerian markets. The Federal Government bonds are the only ones among 31 emerging markets tracked by Bloomberg to have generated a loss this year. Foreign direct investment this year is set to be the lowest since the 2008-09 global financial crisis, according to data from the central bank.
FPI significantly outperformed domestic between 2011 and 2012. In 2013, there was a major rebound in the domestic component, which led to an almost equal split in foreign and domestic transactions.
This dropped in 2014 where FPI outperformed domestic transactions.
In 2015, FPI dropped compared to 2014. However, it slightly outperformed domestic transactions in the same period.  The total domestic transaction increased by 82.89 per cent from January to February 2016. The institutional composition of the domestic market increased by 75.05 per cent from N21.85billion in January to N38.25billion in February, while the retail composition increased by 91.95 per cent from N18.88billion in January to N36.24billion in February. This indicates that institutional investors slightly outperformed their retail counterparts in the period under review.
Asking for his comments on the new development, the Managing Director of Unilever Nigeria Plc. Mr. Yaw Nsankoh, said we should ‘siddon look’ before assessing its likely impacts.
“As you have said, it was introduced yesterday, I don’t want to make hasty comments, because it is a whole raft of things that have been done in the industry. So we have to see where efficiencies are being unlocked., we have to see where  the market is being allowed to determine what the pricing is. And then, we have to see what the end-to-end implications would be,” he said.