Nigerian Oil Marketers Warn of Potential Fuel Price Hike Due to Rising Crude Oil Costs.
Nigerian citizens are bracing themselves for another possible increase in petrol prices, driven by the surge in the cost of crude oil and the devaluation of the Nigerian Naira against the United States dollar. Oil marketers have pointed out that these factors collectively contribute to over 80 percent of the price of Premium Motor Spirit (PMS).
The global benchmark for oil, Brent crude, reached an astonishing $94 per barrel on Sunday, marking the highest price point in 2023. This significant increase follows a year that began with oil trading at approximately $82 per barrel, dipped to $70 per barrel in June, but has now risen above $92 per barrel in recent days.
While the Federal Government and the Nigerian National Petroleum Company Limited have consistently maintained that the era of petrol subsidies has ended, industry operators argue that the government is effectively practicing what they call “quasi-subsidy.”
According to oil marketers, with the recent surge in crude oil prices, the cost of petrol is expected to rise. They emphasize that if the government continues to maintain the petrol price at N617 per liter, then the subsidy on PMS has essentially been reinstated without public acknowledgment.
Chief Chinedu Ukadike, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, stated on Sunday, “The Group Chief Executive Officer of NNPC, in one of his statements, had pointed out that as long as the dollar continues to rise, Nigerians should not expect petroleum products prices to be pegged. The cost of crude oil is also on the rise and it impacts on petrol price, because PMS is derived from crude.”
He further elaborated, “So in this price deregulation regime, once the dollar increases, automatically it means that the cost of importing petroleum products will also increase. And the cost of every other related service will rise.”
Ukadike referred to the current situation as “quasi-deregulation,” highlighting the complex interplay between rising crude oil prices, the Naira’s exchange rate, and the price of petrol. He noted that while higher crude oil prices can benefit Nigeria’s revenue generation, they also result in higher costs for importing refined products.
He emphasized, “The gap is becoming too much. Also, the exchange rate gap between the official and parallel markets is widening. And these gaps have to be filled by the government through quasi-subsidy on petrol.”
Oil marketers also pointed out the challenges faced by investors who initially attempted to import petroleum products after the announcement of subsidy removal. The depreciation of the Naira in the parallel market made it difficult for them to recoup their investments.
Ukadike urged the government to be transparent in its approach to subsidy removal and to fully apply it so that competition can thrive in the sector. As Nigerians watch these developments closely, the possibility of an impending fuel price hike remains a significant concern for consumers and industry stakeholders alike.
