In a concerning development for Nigerians, oil marketers have issued a warning that another surge in petrol prices looms on the horizon. This impending increase is attributed to the escalating cost of crude oil, coupled with the continued depreciation of the Nigerian naira against the United States dollar.
Oil industry experts have elucidated that the price of crude oil and the exchange rate of the dollar account for more than 80 percent of the total cost of Premium Motor Spirit (PMS), commonly known as petrol.
On Sunday, Brent crude, the global benchmark for oil, reached a staggering $94 per barrel, marking the highest figure witnessed in 2023. At the beginning of the year, oil prices hovered around $82 per barrel, briefly plummeting to $70 per barrel in June, only to rebound, currently trading above $92 per barrel.
Despite the Federal Government’s and Nigerian National Petroleum Company Limited’s (NNPC) assertion that subsidy on petrol had been eradicated, following the deregulation of the downstream oil sector, industry operators contended on Sunday that the government was surreptitiously implementing a quasi-subsidy.
They argued that with the recent surge in crude oil prices, the cost of petrol was naturally meant to increase. They stressed that if the government persisted in maintaining the petrol price at N617 per liter, it effectively signified the covert revival of subsidy on PMS.
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 product prices to remain static.”
“The cost of crude oil is also on the rise and it impacts petrol prices because PMS is derived from crude. In this price deregulation regime, as the dollar increases, it automatically translates to higher costs for importing petroleum products and all related services. Thus, the fuel we are purchasing today at N617 or N596, depending on proximity to depots, is actually priced lower than it should be, considering the rise in the dollar and crude oil prices.”
Ukadike further emphasized, “What we are experiencing now is quasi-deregulation. The surge in crude oil prices has both positive and negative effects on Nigeria. It positively boosts dollar generation from crude exports, but negatively affects us as we still utilize those dollars to import refined products. The gap between these factors is becoming too substantial. Additionally, the exchange rate disparity between the official and parallel markets continues to widen, necessitating government intervention through quasi-subsidies on petrol.”
In conclusion, Ukadike urged transparency in the government’s approach to subsidy removal and encouraged its full application to foster healthy competition within the industry.