Why Petrol Price May Go Up Again in Nigeria as Crude Oil and Dollar Rise

Nigerians may have to brace themselves for another hike in the pump price of petrol, as the cost of crude oil and the exchange rate of the dollar have increased significantly in the global market.

Oil marketers have warned that these two factors account for over 80 per cent of the cost of petrol, which is derived from crude oil and imported with dollars.

Newsflash Nigeria reports that Brent crude, the global benchmark for oil, rose to $94/barrel on Sunday, the highest figure in 2023. Oil had started the year at about $82/barrel, dipped to $70/barrel in June, but traded above $92/barrel in the past week.

The report also stated that the naira has depreciated against the dollar, making it more expensive to import petrol. The official exchange rate of the Central Bank of Nigeria (CBN) as of Friday was N773.5/$1, while the parallel market rate was N930/$1.

Although the Federal Government and its Nigerian National Petroleum Corporation Limited (NNPC) had insisted that subsidy on petrol had ended, following the deregulation of the downstream oil sector, operators insisted on Sunday that the government was implementing quasi-subsidy.

They explained that with the latest rise in crude oil price, the cost of petrol was meant to increase, stressing that if the government insists on leaving the commodity at N617/litre, then subsidy on PMS had been returned quietly.

The National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief Chinedu Ukadike, in a statement on Sunday said, “The Group Chief Executive Officer of NNPC, in one of his statements, had pointed out that as long as the dollar continues to rise, Nigerians should not expect petroleum products prices to be pegged.”

He added that “the fuel we are buying today at N617 or N596 depending on where you buy it and based on the nearness to depots, is actually below what the price should really be, going by the rise in dollar and crude oil price.”

He said that the gap between the actual cost and the selling price was being filled by the government through quasi-subsidy on petrol.

He also said that most of the investors who tried to import products when it was announced that the subsidy on petrol had been removed, are now finding it very difficult to do so.

“This is because after buying the dollar in the parallel market, they cannot recoup what they have invested. So the government must be transparent with this subsidy removal thing. It should apply it to the fullest, so that competition can set it,” he said.

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