FG Increases Landing Cost for Imported Fuel Products Amid Deregulation Efforts

The Federal Government has raised the landing cost of imported premium motor spirit (PMS), commonly known as petrol, by 4% to N956.13 per litre for October 2024, up from N919.55 in September. This increase follows a shift in exchange rates from N1,625/$ in September to N1,645/$ in October, further exacerbating cost pressures in the deregulated downstream sector.

According to data from the Nigerian National Petroleum Company Limited (NNPCL), the increase in landing costs, driven by forex differentials, aligns the price of imported PMS with that of locally produced fuel. As a result, petrol is now selling at around N1,000 per litre at major outlets, while independent marketers in Lagos are pricing it between N1,005 and N1,020 per litre, slightly above the officially recommended pump price of N998 per litre.

However, petroleum marketers have warned that any significant change in exchange rates could upset this fragile pricing balance. Speaking on the issue, they emphasized the need for more transparency and competition in the sector to ensure an even playing field for all operators.

Marketers Call for Competitive Market Environment

With the deregulation of the petroleum market, independent marketers are now looking forward to greater competition. Joseph Ehimen, Chairman of the Lagos chapter of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), highlighted the opportunity for entrepreneurs to import fuel or establish more modular refineries. He further suggested the government should consider either selling or revamping its four refineries to boost competition.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) also welcomed the new market freedom, allowing its members to source fuel from both local and international markets. IPMAN’s Public Relations Officer, Chief Chinedu Ukadike, noted that marketers would seek to buy fuel from the cheapest available sources to remain competitive.

Direct Purchase from Dangote Refinery

In a significant policy shift, Finance Minister and Coordinating Minister of the Economy, Wale Edun, announced that all marketers are now free to purchase directly from the Dangote Refinery in Lagos. This move ends the previous arrangement where the NNPCL acted as the sole buyer of products from the refinery.

Edun highlighted that the new direct purchase model would enable marketers to negotiate commercial terms with local refineries, fostering competition and improving supply chain efficiency. He further stated that this transition marks the beginning of a more competitive market environment and is expected to enhance product availability and stabilize prices.

A New Era for Nigeria’s Petroleum Industry

The Managing Director of 11 Plc, formerly Mobil Oil Nigeria Plc, Mr. Adetunji Oyebanji, praised the government’s decision to eliminate fuel subsidies and fully deregulate PMS pricing. He emphasized that selling crude to local refineries in Naira at a fixed exchange rate would protect consumers from the volatility of the forex market, while also reducing transportation costs for both crude oil and refined products.

Oyebanji cautioned, however, that market dynamics would now determine fuel prices, meaning prices could fluctuate in response to changes in supply and demand. Nevertheless, the elimination of subsidies is seen as a necessary step to stabilize the sector and curb fuel smuggling to neighboring countries.