How Forex Volatility and Subsidy Crisis Threaten Nigeria’s Fuel Supply, Landing Cost Hits N720/litre

Nigeria is facing a looming fuel crisis as the cost of importing petrol has skyrocketed due to the volatility of the foreign exchange rate. Oil marketers have warned that many depots and filling stations are running out of stock or shutting down, as they cannot afford to buy petrol at the current landing cost of N720/litre.

According to the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), the landing cost of petrol into Nigeria has increased by over 10% since August, when it was N651/litre.

This is mainly due to the depreciation of the naira against the dollar, which has reached N766/$1 at the official rate and N990/$1 at the parallel market.

NOGASA’s National President, Benneth Korie, said that many depot owners were unable to secure bank loans to fund their business due to high-interest rates and exchange rate instability. He also said that filling station owners were finding it extremely difficult to secure funds to procure products for their retail outlets.

He said, “Both the independent and major marketers are so terribly affected. As of today, filling stations are shutting down in great numbers on a daily basis and dealers are going out of business, with many more on the verge of bankruptcy because of their inability to secure funds to facilitate orders for their stations.”

He urged the government to intervene urgently to save the industry from an impending collapse, which would have a devastating impact on the economy and the livelihoods of millions of Nigerians.

However, the government has not yet announced any plans to address the situation, as it claims that it has stopped subsidising petrol since March 2020.

The Petroleum Products Pricing Regulatory Agency (PPPRA), which used to publish monthly price bands for petrol, has not done so since July 2020.

The Nigerian National Petroleum Corporation (NNPC), which is the sole importer of petrol in the country, has maintained a pump price of N162/litre since November 2020, despite the rising cost of crude oil and exchange rate.

Newsflash Nigeria gathered that the landing cost of petrol has risen to N720/litre from N651 in August.

The Chief Executive Officer, PETROCAM Trading (Nig) Ltd., Patrick Ilo, said 52,000 metric tonnes of petrol imported by the company on Tuesday was already N720/litre without subsidies.

According to him, if the landing cost was already N720, the pump price should be around N729/litre in Lagos State if the Federal Government had truly stopped subsidising the product.

“This is the second time I am bringing in my vessel. But after bringing it in, I am trapped. I can’t sell it because I landed my own product at N720. And if you add transportation from depot to station, the value today should be N729/litre at the pump.”

He blamed the price hike on high foreign exchange rate, adding that the Federal Government was still subsidising petrol through the Nigerian National Petroleum Company Limited.

The foreign exchange rate of the Central Bank of Nigeria as of Wednesday was around N766/$1, while it hovered around N990/$ at the parallel market.

He said.”Yes, PETROCAM has an import license, and we have products in Nigeria. I want to say this out loud that I brought (in product) 52,000 metric tonnes of PMS today, which I borrowed about sixty-something million dollars to import.

“But I cannot sell. Why? Because of the price NNPC is selling. NNPC to my mind, they are still subsidising. NNPC is quietly subsidising the market. And I don’t blame the government. It is when we have a stable government that there could be prosperity.”

Ilo added, “As of today, NNPC is subsidising these products. And I’m talking about a subsidy of more than N100/litre. Because if you need to sell today, I landed my own product at N720. So how do you look at it? You look at it from the perspective of how much is diesel”

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