Nigerians have been cautioned to brace themselves for yet another impending surge in the price of gasoline at the pumps.
This impending increase is primarily attributed to the recent escalation in the cost of crude oil, exacerbated by the depreciation of the Nigerian naira against the United States dollar.
According to oil industry experts, the costs associated with crude oil procurement and the prevailing exchange rate with the U.S. dollar constitute more than 80 percent of the total price of Premium Motor Spirit (PMS).
The price of Brent crude, the global standard for oil, skyrocketed to $94 per barrel on a recent Sunday, marking the highest level witnessed in 2023. The year had commenced with crude oil priced at approximately $82 per barrel, later dipping to $70 per barrel in June, only to surge beyond $92 per barrel in the preceding week.
Despite the Federal Government’s and the Nigerian National Petroleum Company Limited’s staunch insistence that they had discontinued petrol subsidies following the deregulation of the downstream oil sector, industry stakeholders contend that the government is, in practice, executing a form of quasi-subsidy.
They elucidated that, given the recent surge in crude oil prices, the price of petrol is naturally expected to rise. Thus, they emphasize that if the government persists in maintaining the commodity’s price at N617 per liter, it implies a quiet reinstatement of subsidies on PMS.
The National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, 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.
“The cost of crude oil is also on the rise and it impacts on petrol price, because PMS is derived from crude.
“So in this price deregulation regime, once the dollar increases, automatically it means that the cost of importing petroleum products will also increase. And the cost of every other related service will rise.
“So 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.
“I said earlier that what we are experiencing now is quasi-deregulation. The rise in crude oil price has both positive and negative effects on Nigeria. It is positive because it increases our generation of dollars when we sell the crude.
“But it is negative in the sense that we still use that dollar that we have got to import the finished products of crude. That is the problem. For if Nigeria is refining products, then there will be a windfall, but since we import with the dollar that we make, then it makes no sense.
“The gap is becoming too much. Also, the exchange rate gap between the official and parallel markets is widening. And these gaps have to be filled by the government through quasi-subsidies on petrol.
“You also know 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.”
What do you want to ask or share?