Showing posts with label Market Fundamentals. Show all posts
Showing posts with label Market Fundamentals. Show all posts

The Fuel Price Hike, Market Fundamentals And The Way Forward

The government, it appears, has decided to bite the bullet so as to put in place a more transparent pricing model, stimulate investment growth in the sector and encourage resumption of product imports by oil marketing companies.

Regrettably, with the shamble and rot in the downstream sector of Nigeria’s oil and gas industry, government throwing the sector up into the risky and uncertainty space and manipulative tendency of market fundamentals leaves us with concern.

One great pitfall of market fundamentals is its poor scientific outlook and dangers it will pose to our economy. The petroleum products marketers in this realm would be market fundamentalists.

To this end we are confronted with the following questions: Will the market fundamentalist not exploit consumers with arbitrary pricing and round-tripling of PMS? Would the market fundamentalist not create artificial scarcity of PMS? Will the market fundamentalist not put pressure on the naira? Will the market fundamentalist not join forces with forex speculators to sabotage, distort and deflect our foreign reserve? How would the uncertainty challenges of accessing foreign exchange be addressed?

The way forward? Firstly, if the government is serious about the deregulation of the sector, it is not by surrendering PMS price to market fundamentals that are predicated on free market capitalist economic principles not devoid of rooted sharp practices and market manipulation.

Secondly, repositioning the sector is to attract the much-needed investments in functioning refineries and pipelines transport construction in the country with incentives for investors in those sectors.

Thirdly, the government should also avoid creating a situation where the market fundamentals in PMS importation becomes a nightmare to CBN’s sustained and painstaking efforts to keep the naira stable.

Lastly, we expect healthy competition among marketers that would enhance value for consumers without monopolistic structure that market fundamentals normally throw up, to kill vibrant and competitive market, a cyclical feature of free-market economy. We must say here that market fundamentalists are primitive accumulators and maximum profit-minded.

Source: Daily Trust