Nigerians should expect another increase in petrol pump prices soon, according to oil marketers.
This is due to rising crude oil costs coupled with naira depreciation against the US dollar, which together account for over 80% of petrol production costs.
Brent crude, the global benchmark, rose to $94/barrel on Sunday, its highest in 2023 after starting the year around $82/barrel and dipping to $70/barrel in June. It has traded above $92/barrel in the past week.
Although the Federal Government and its Nigerian National Petroleum Company Limited (NNPC) insisted petrol subsidy ended with downstream deregulation, operators say a quasi-subsidy exists.
With crude prices rising, petrol costs should also increase. If government maintains N617/litre pricing, it has quietly reintroduced subsidy according to Independent Petroleum Marketers Association of Nigeria (IPMAN).
NNPC’s GCEO previously said as the dollar strengthens, petrol prices cannot remain fixed. Crude costs directly impact petrol since it derives from crude. So in a deregulated regime, a stronger dollar automatically increases imported petrol costs and related services, said IPMAN’s National Public Relations Officer, Chief Chinedu Ukadike.
The current N617 or N596/litre price, depending on location, falls below true costs given currency and crude changes. This is quasi-deregulation.
While high crude prices raise Nigeria’s dollar earnings, those dollars then import finished products since Nigeria lacks refining capacity – a key problem, Ukadike explained.
Widening official versus parallel exchange rate gaps must be filled by government through petrol quasi-subsidies. Most marketers who imported after subsidy removal find it unprofitable, buying dollars at parallel rates but unable to recoup investments.
The FG must apply full transparency in subsidy removal for competition to take hold, Ukadike concluded.