As Nigeria grapples with a deepening foreign exchange crisis, the landing cost of imported petrol has soared to over N1,000 per litre, surpassing previous levels, according to findings by BusinessDay.
At the prevailing black-market exchange rate of N1,500 per dollar, investigations reveal that the landing cost of petrol, encompassing the product’s international price, shipping, insurance, and associated charges, has surged to N1,009 per litre from N720 per litre recorded in October 2023.
A senior executive in the downstream sector attributed the escalating landing cost to the exacerbating FX crisis, necessitating interventions such as subsidies to cushion the impact on consumers who are unable to afford the market price for petrol.
Following trading activities on Monday, the naira experienced a 4.19 percent depreciation, with one dollar quoted at N1,534.39 compared to N1,469.97 quoted on the preceding Friday at the Nigerian Autonomous Foreign Exchange Market.
Bismarck Rewane, CEO of the Financial Derivatives Company, noted a reduction in subsidy, suggesting that if fully removed, petrol prices would rise significantly.
Energy analyst Aisha Mohammed emphasized the partial subsidization of petrol by the government for political, social, and economic reasons, highlighting the complexities involved in subsidy removal.
Further investigations reveal that the landing cost of N1,009 per litre excludes additional charges such as Nigerian Ports Authority fees, vessel charges, and other distribution costs, some of which are dollar-denominated.
Efforts to confirm if the federal government has reinstated petrol subsidies through Olufemi Soneye, NNPC’s chief corporate communications officer, were unsuccessful.
President Bola Tinubu’s declaration on May 29, 2023, signaling the end of petrol subsidy, was promptly implemented by NNPC the following day, leading to a surge in petrol prices.
The debate over fuel subsidy has persisted since the 1980s, with public spending in the sector increasing despite challenges such as under-investment in infrastructure and smuggling.
NNPC resumed sole petrol imports in Nigeria since October, following a halt by marketers due to increased oil prices and naira depreciation, which elevated the product’s landing cost.
While the government pledged to reinvest subsidy gains into critical sectors, there has been little observable change, prompting skepticism over the transparency and utilization of surplus funds.
Sources reveal that some state governors have converted surplus naira funds into dollars, further straining the currency’s value, instead of channeling resources towards infrastructure and human capital development.