Rising crude oil prices and a weakening naira against the US dollar have raised concerns among oil marketers in Nigeria. They believe that these factors might lead to an increase in the pump price of Premium Motor Spirit (PMS), commonly known as petrol. According to oil marketers, the cost of crude oil and the exchange rate are the two main factors affecting the price of petrol, constituting over 80% of its overall cost.
Brent crude oil, the global benchmark, recently surged to $94 per barrel, reaching its highest level in 2023. At the beginning of the year, oil prices were around $82 per barrel but dipped to $70 per barrel in June. However, they have since rebounded to above $92 per barrel in the past week. Concurrently, the Nigerian naira has significantly weakened, with reports indicating a rate of N950 per US dollar in the parallel market.
Despite government claims, alongside the Nigerian National Petroleum Company Limited (NNPCL), that petrol subsidies have been abolished, oil marketers argue that the government is effectively implementing a quasi-subsidy due to recent developments. They contend that if the government continues to maintain a fixed pump price for petrol, it effectively amounts to a return of the petrol subsidy.
The rise in crude oil prices and the depreciating naira have created a growing gap, making it challenging for investors to import petroleum products while maintaining profitability. Oil marketers suggest that the government should be transparent about the situation, either by fully deregulating petrol prices or openly acknowledging the return of a subsidy.
The National Association of Road Transport Owners (NARTO) has also expressed concerns, noting that the price cap on petrol has made it difficult for marketers to adjust transportation costs for petrol, further affecting the overall cost of doing business in the sector.
Despite government assurances that petrol prices will not increase, oil marketers and industry stakeholders believe that the current circumstances may necessitate a change in the pricing structure for petroleum products to reflect the rising crude oil costs and exchange rates.
As the Nigerian government continues to grapple with economic challenges related to fuel pricing and subsidies, the situation remains fluid, and potential adjustments to petrol prices may be on the horizon.
