Strong indications are emerging that petrol stations throughout the nation are poised to escalate the pump prices of Premium Motor Spirit, commonly known as petrol, in the coming days, further burdening the already strained Nigerian populace.
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Petrol Price Hike in Nigeria
If implemented, these proposed price adjustments will mark the third escalation in a span of 10 weeks since the declaration of the removal of the petrol subsidy.
Basis for the Impending Price Changes:
Detailed analysis provides insights into the factors driving the impending price increases.
1. Removal of Subsidy:
The primary catalyst for the shift in petrol prices stems from the elimination of subsidies on petroleum products in Nigeria. As President Bola Tinubu announced during his inauguration, this move has paved the way for market dynamics to dictate pump prices. This departure from the subsidy framework implies that Nigeria is now vulnerable to international oil price fluctuations.
2. Global Crude Oil Price Surge:
A pivotal contributor to the surge in petrol prices is the upward trajectory of global crude oil prices. As President Bola Tinubu's inaugural address reiterated, the era of extended fuel subsidies has ended, enabling market forces to influence pump prices. Consequently, when crude oil prices escalate, Nigerian consumers inevitably face higher costs.
Investigations reveal that Brent crude, the international oil benchmark, escalated from $76 per barrel in June 2023 to $86 per barrel by Monday, August 14. This escalation necessitates Nigerian oil traders to allocate more funds for importing supplies.
Reports further indicate that the landing cost of petrol saw a month-on-month increase of 37.4% to N632.17 per litre in July 2023, compared to N460 per litre in June 2023.
3. Naira Depreciation:
Since the last surge in pump prices, the Naira has experienced a depreciation of approximately 6.5% against the US dollar in the official market and 25% in the parallel market.
Chinedu Okoronkwo, the Independent Petroleum Marketers Association of Nigeria (IPMAN), confirmed the impending price hike due to Naira depreciation, stating, "As long as the dollar keeps rising against the naira in the foreign exchange market, the price of fuel in the country will continue to increase."
Continued exchange rates oscillating between N910 and N950 per dollar in the parallel market, along with closer to N800 in the official market, project further petrol price increments.
4. Scarcity of Foreign Exchange:
Oil importers are grappling with a shortage of foreign exchange (forex) required for importing petrol. This forex shortage impedes dealers' ability to secure the necessary funds for importing the commodity. Reports suggest that some oil marketers are contemplating suspending imports due to the forex difficulties. Such a scenario could potentially leave the NNPC as the exclusive importer, allowing other marketers who do secure the product to elevate prices.
Mixed Consequences of Rising Crude Oil Prices:
In a separate report, it was revealed that global crude oil is nearing $90 per barrel, reaching its highest level since 2023. Although this development could be seen as positive for an oil-producing nation like Nigeria, it presents a challenging situation. The ongoing struggle to meet production quotas coupled with the discontinuation of fuel subsidies and the lack of operational refineries all point toward an inevitable hike in petrol pump prices, which may not bode well for Nigerian citizens.