Following a further decline in the value of the naira versus the US dollar, oil marketers insisted on a potential increase in the price of fuel at the pump on Thursday.
Concerns over whether the price of fuel at the pump may remain the same increased when the local currency declined against the dollar on the black market from 900 to 920 on Thursday.
About two weeks ago, the naira reached 945 to the dollar in the black market. Last week, it recovered.
The local currency started moving southward this week, nevertheless, which has concerned economic managers and oil and gas industry stakeholders.
Oil marketers and dealers on Thursday said that the pump price of fuel could not stay at N617/litre with the exchange rate at N920/$, especially if the present exchange rate persisted.
They said that the currency rate was about N750/$ to N800/$ at the time the cost of fuel was set at N590/litre to N617/litre, and they again estimated a cost of between N680/litre and N700/litre for PMS, based on an exchange rate of N920/litre.
The oil marketers, however, pointed out that since the Federal Government had insisted that it would not increase the petrol price, it must then be “subsidising the commodity secretly, based on the prevalent exchange rate reality.”
According to the predictions and analyses of oil marketers and dealers, the Federal Government may thus be subsidizing gasoline by around N90 owing to the collapse of the local currency versus the US dollar.
On Thursday, it was reported that the ex-depot price of gasoline was around N585 per litre. According to the predicted price of N680 per litre and the current exchange rate, the government may be required to pay around N95 per litre in subsidies.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority said last week that the country’s average daily fuel usage was 52 million liters.
This suggests that the government may be obliged to pay nearly N153 billion in fuel subsidies each month when multiplied by the predicted subsidy of N95 per litre and computed for a month.
President Bola Tinubu has directed that the price of fuel not rise, according to Ajuri Ngelale, the Special Adviser to the President on Media and Publicity, who spoke to reporters from the State House last week.
“Mr President wishes to assure Nigerians following the announcement by the NNPC Limited just yesterday (Monday) that there will be no increase in the pump price of PMS anywhere in the country. We repeat, the President affirms that there will be no increase in the pump price of PMS,” he said
NNPCL had also last week, spoken up as regards the widespread concern of a possible hike in the pump price of petrol.
“Dear esteemed customers, we at NNPC Retail value your patronage, and we do not have the intention to increase our PMS pump prices as widely speculated. Please buy the best quality products at the most affordable prices at our NNPC Retail stations nationwide,” the company stated.
NNPC Retail is the downstream subsidiary of NNPCL that retails refined petroleum products for the group.
IPMAN warns
Recall that oil marketers had previously said that, should the jump in the exchange rate continue, the price of gasoline will increase to between N680 and N720 per litre in the upcoming weeks.
On Thursday, they reiterated their assertion that the price of fuel will certainly increase despite the stances taken by NNPCL and the Presidency since the decline in the naira exchange rate had not subsided in recent days. They emphasized that the only solution would be if the government had discreetly ended fuel subsidies.
“I still maintain that since we are still importing petroleum products into this country, it has to do with forex. And once it has to do with forex, it means that so much naira will be chasing a few dollars.
“And since we don’t have the influx of dollars into Nigeria, the after effect is that the landing cost of petrol will continue to increase as long as the dollar continues to rise,” the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Chinedu Ukadike, added.
He added, “The rise in dollar automatically leads to an increase in the cost of petroleum products, except the NNPCL is subsidising it through the Federal Government. I also recall the last statement by the Special Adviser to the President on Media, who said he got a brief from the president that the fuel price would not rise.
“That automatically means that there is quasi-deregulation and that Mr President is cushioning the price of petroleum products in relation to the dollar. So if the dollar is higher at the parallel market, it means that whatever is the offshoot, the Federal Government will continue to keep petrol prices within a price regime.
“And that regime currently is from N590/litre to N620/litre depending on the part of Nigeria you are buying it from. But if you allow the commodity to sell at the free market price, with respect to the hike in dollar currently, the cost of petrol should be around N680/litre and N700/litre.”
Also speaking on the issue, the Secretary, IPMAN, Abuja-Suleja, Mohammed Shuaibu, noted that the petroleum products market today is largely determined by forex.
“Of course, there was panic when the dollar was almost hitting N1,000, which is why the government is supposed to act quickly to avoid a crisis. They (the government) debunked projections of fuel price hikes.
“But the truth is that as it is now, no indigenous marketer is going to bring in this product any longer because of the rate of the dollar. The petrol being consumed now is from the reserve, but we don’t know what the government’s plan is. I don’t know if there is any ship that is bringing in products now.
Marketers shun importation
“However, what I know is that no marketer wants to go and import petrol again. Everyone is careful right now. That is why people are saying that the government is going to bring back fuel subsidy, particularly with what happened in Kenya recently,” Shuaibu stated.
He pointed out that “when nobody wants to import, automatically the government has to do something internally or secretly because it had already come out to tell the public that it would not go back to fuel subsidy and would not increase the pump price of petrol. So which magic is it going to do?”
Earlier, the President, of Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, explained that in practical terms one would say subsidy on petrol had returned.
Gillis-Harry said, “We heard the President’s firm commitment to keeping deregulation on stream and also to ensure the sustenance of subsidy removal. One would say there is subsidy, going by the rising forex and crude oil prices, but since the President said no return of subsidy, let’s take it that way.”
