The Lagos Chamber of Commerce and Industry (LCCI) has commended the Federal Government for its proposed petrol price-stabilisation mechanism aimed at shielding Nigerian businesses and households from the immediate impact of fluctuations in international crude oil prices and foreign exchange rates.
In a press statement signed by its Director-General, Dr. Chinyere Almona, on Sunday, the chamber stated that it recognised the economic rationale behind the initiative, particularly at a time when rising energy and transportation costs are putting considerable pressure on businesses, weakening household purchasing power and undermining the competitiveness of Nigerian enterprises.
Almona explained that the proposal to establish a ceiling of ₦1,350 per litre on the ex-gantry or landing cost of petrol, with monthly reviews and public disclosure, represents an acknowledgement by the government that excessive volatility in energy prices has significant consequences for the wider economy.
In addition, she added that the LCCI also welcomes the intention to introduce greater predictability into petrol pricing without necessarily returning to the former fuel subsidy regime.
The LCCI Boss however pointed out that while price stability is desirable, stability at an excessively high price is not sufficient to restore business competitiveness, adding that Nigeria needs a mechanism that delivers both price stability and a progressive reduction in petrol prices over a defined period.
She said: “The Chamber is concerned that the proposed arrangement, in its present form, may cushion businesses against sudden increases without necessarily bringing down the already elevated cost of energy.
“Nigerian businesses are contending with high electricity tariffs, substantial expenditure on alternative power generation, rising logistics costs, expensive financing and other structural constraints. Petrol price increases compound these pressures, affecting distribution, transportation, production and the cost of delivering goods and services.
“Although the proposed ceiling may moderate the immediate transmission of international oil price and exchange-rate shocks, it does not, on its own, guarantee that petrol prices will decline to levels that provide meaningful relief to businesses and consumers.”
Furthermore, the LCCI DG noted, “requiring refiners and importers to absorb temporary cost increases and recover them when market conditions improve may smooth price movements, but it could also create deferred cost obligations.
“If these obligations are not transparently accounted for and recovered within clearly defined limits, they could eventually place renewed upward pressure on prices.”
She added, “The Chamber therefore urges the Federal Government to complement the proposed stabilization mechanism with a six-month Petrol Price Reduction Program designed to deliver progressive, measurable and sustainable reductions in domestic pump prices.”
On the LCCI recommendations to federal government, Dr Almona observed that
the LCCI proposes that the Federal Government, working with domestic refiners, petroleum marketers, regulators and other relevant stakeholders, establish a six-month programme with the objective of reducing petrol pump prices by approximately 15–20 per cent from the prevailing national weighted-average price, subject to independently verified supply costs, market conditions and the sustainability of the proposed measures.
For the proposed programme to be credible and commercially sustainable, the Chamber recommends five additional measures.
“First, improve domestic crude supply to refineries. Nigerian refineries should have more predictable access to crude under transparent, commercially viable arrangements.
“Reliable supply can reduce procurement uncertainty, foreign-exchange exposure and avoidable logistics costs.
“Second, boost the deployment of alternative transportation mechanisms like the CNG initiative, electric vehicle infrastructure, and other interventions that will reduce the cost of moving goods and persons across the nation.
“Third, reduce avoidable logistics and distribution costs. Government should work with industry operators to address transportation bottlenecks, improve storage and distribution infrastructure, and eliminate unlawful charges and rent-seeking practices that inflate the final pump price.
“Fourth, maintain exchange-rate and macroeconomic stability. Because petroleum supply costs remain sensitive to the exchange rate and international prices, a credible reduction in foreign-exchange volatility would improve price predictability.
“Fifth, protect commercial viability and fiscal transparency. The price-smoothing arrangement must not impose open-ended losses on refiners and importers, discourage investment or create fuel shortages.
“Any price-modulation mechanism should have clear rules for entry, exit and the treatment of accumulated obligations.
According to her, “The Chamber therefore urges the government to evaluate the proposed initiative not merely by how successfully it prevents sudden price increases, but by whether it contributes to lower operating costs and improved economic welfare.
“The LCCI also recognises that Nigeria cannot insulate its domestic petroleum market indefinitely from developments in international oil markets.
“A sustainable approach must acknowledge global crude and refined-product prices while reducing the domestic costs that unnecessarily amplify their impact.”
On the Chamber’s stance, Dr. Almona stated, “Our position is clear: we welcome the government’s intervention to moderate price volatility, but the next step must be a credible plan to bring petrol prices down progressively, sustainably and transparently.
Nigerian businesses have demonstrated considerable resilience in the face of high operating costs.
“However, resilience alone cannot sustain competitiveness indefinitely. Businesses need an environment in which energy is more affordable, logistics are more efficient, investment is commercially viable and policy interventions deliver tangible economic benefits.”
“We wish to see the ultimate impact of these policy Interventions bring about Nigerian businesses spending less on petrol, transportation and distribution costs moderating, and consumers experiencing meaningful relief.
“Chamber says price stability is welcome, but Nigerian businesses need sustained price reductions to restore competitiveness and protect jobs.”
