The fall of the naira against the United States dollar, coupled with the recent rise in global crude oil prices, is making Nigerians apprehensive of a possible hike in the pump price of Premium Motor Spirit, popularly called petrol.
Although the Nigerian National Petroleum Company Limited and other oil marketers have not announced any increase in petrol price, they confirmed that the scarcity of foreign exchange and crude oil price rise were key factors that determined PMS price.
Petrol price moved up from N198/litre in May to over N500/litre in June after President Bola Tinubu removed subsidy on PMS. The cost jumped again to over N600/litre in July, and there were concerns that it might rise further in August, going by the crash of the naira against the dollar.
The naira dropped below N900 against the dollar on Thursday at the parallel market. It also fell against the US dollar at the official Importers and Exporters forex window.
Also on Thursday, Brent, the global benchmark for crude oil, was traded at about $87/barrel. It traded for less than $80/barrel a few weeks ago.
A resident of Abuja, Collins Nnabude, stated that the crash of the naira against the dollar and the recent rise in crude oil price is making one apprehensive when you consider the effect on petrol price in Nigeria. Fuel price is likely going to rise again this month. Oil marketers also confirmed the possibility of another hike in petrol price this month.
The President, Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, said that So long as the naira is losing against the dollar, the price of petrol in our retail outlets will continue to increase.
He called on Tinubu to make sure that Nigeria’s refineries were put back to use. He expressed that they have put forward a request for the President to declare a state of emergency on their refineries to expedite their repairs. This approach is the most reliable way to proceed in order to forecast the pricing of petroleum products, as currently, every purchase of PMS from retail outlets is linked to the dollar.
Addressing the situation, Chinedu Okonkwo, the National President of the Independent Petroleum Marketers Association of Nigeria, noted that the downstream oil sector has undergone complete deregulation, and thus, the cost of PMS will continue to experience fluctuations.
He stated that in a deregulated environment without subsidies, the price of petrol can either rise or fall. However, those seeking to maximize profits should be aware that competitors who offer lower prices will affect their business prospects. Furthermore, oil marketers speculated that the Federal Government might step in due to the ongoing increases in crude oil prices and the ex-depot price of petrol.
Mike Osatuyi, the National Controller of Operations for the Independent Petroleum Marketers Association of Nigeria remarked that First and foremost, he must commend President Tinubu for eliminating fuel subsidies, as the country would have faced significant burdens otherwise. With the escalating crude oil prices, it's evident that the petrol consumption has decreased. Concurrently, the rising crude oil prices imply that Nigeria will have more funds in addition to the savings from subsidy removal. Consequently, as the country's funds increase, they will need to pay more as petrol prices continue to rise.
Osatuyi elaborated that The ex-depot price currently ranges between N585 and N590 per liter, varying by depot. This price will either rise or fall based on changes in crude oil prices and exchange rates. Nonetheless, the president has assured that interventions will be implemented if deemed necessary. Therefore, he believes they are closely monitoring the situation as it unfolds.
