Nigerians should prepare for another increase in the pump prices of petrol, due to the continued scarcity of foreign exchange to finance the importation of the product, oil marketers have said.
According to them, the United States dollar hit an all-time high last week, as it exchanged for N400 at the parallel market.
Worried by the development, the marketers say if not urgently addressed, the pump prices of petrol will not remain at the approved rates.
It also stated that the market was to be driven by the factors of demand and supply, as it was now largely in the hands of private sector players.
But oil marketers told our correspondent on Monday that despite the competition in the business, they were struggling to retain the price of the Premium Motor Spirit within the approved range.
“The truth is that Nigerians just have to brace for higher PMS price; there are no two ways about it. The government cannot fund this market; the money is not just there. Even if the government wishes to assist, it does not have the wherewithal to do. So, Nigerians should brace for higher rates,” an official of one of the notable oil marketing companies, who spoke to our correspondent on condition of anonymity, said.
He added, “We are all aware that the price of crude has been falling in the international market and it is the dollar the government gets from crude sale that it uses to solve forex problems. So, there’s no fast rule or solution to it than for all of us, both users and marketers, to just prepare for a price hike.
“For marketers, they should know that the days of higher profits are gone. Before now, if you want to import petrol, you’ll have to wait for months and possibly bribe some people to get an import licence. But those days are gone; nowadays, every interested dealer can get the licence and this has created room for competition, which is why you still get the product at around N140 to N145 per litre. We only hope that this will continue as the dollar availability improves.”
A member of the Major Oil Marketers Association of Nigeria stated that the ex-depot price of the PMS had remained at N133.28 per litre because the marketers were doing their best to manage the situation.
The marketer, who also pleaded to remain anonymous because of the sensitive nature of the subject, said the PMS dealers hardly got forex at the rate that the government initially promised them.
He said, “It is very logical for the PMS price to rise any moment from now, for there is no way somebody can import at the rate of N400 to a dollar and you expect him to continue selling at the official ex-depot price. And mind you, the government promised to facilitate forex provision to marketers at N287 to a dollar, because you cannot buy at N400 and expect to continue selling at the prevalent rates you see at filling stations today.
“However, most depots are still managing the situation and are selling at the recommended price of N133.28 per litre to filling stations. It is when it goes above this price that you will notice the eventual increase in the pump prices of the PMS. So, if the trend of forex unavailability continues, then the situation may go out of the control of the marketers.”
On whether oil dealers have a peculiar channel for sourcing forex outside the official and parallel markets, the source said, “There’s no other way for sourcing it. Although outside the parallel market, there is still an autonomous market where you may get the dollar at rates that are less than what you get from the parallel.
“There are usually two prices at the market and marketers look at the one with the lower price, which is mostly the government regulated rate. However, the difference between the two prices is marginal most times.”
A senior official of the Independent Petroleum Marketers Association of Nigeria, Mr. Dibu Aderigbigbe, had earlier told our correspondent that the forex crisis might lead to a further hike in petrol price if it persisted.
“The dollar is the major legal tender used for the importation of petroleum products; so, any crisis in forex will definitely affect the prices of these commodities in the long run. However, we hope the situation is addressed in earnest,” he said.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, recently made it clear that the government had liberalised the downstream oil sector, stressing that the refined products and their prices were in the hands of private sector players.
When contacted, the spokesperson for the CBN, Mr. Isaac Okoroafor, said since the flexible foreign exchange rate regime commenced, the apex bank made it clear that all transactions would be based on the prevalent forex market rate.
He said, “As soon as we introduced the new flexible foreign exchange market, it was made clear to everybody that all transactions must go through that market. The only concession we made was that, yes, we agreed that the IOCs will sell dollars to petrol importers, but it must be at the prevailing rate of the market on the day of the transaction.
“What we have done for transactions concerning oil importation is that the IOCs are allowed to sell their foreign exchange to petrol importers, because oil is a very important commodity to the nation. But the IOCs must sell at the ruling exchange rate from the market for that day and this means the prevalent rate for the day.
“For instance, today, the market closed at N311 to a dollar, which means if they (IOCs) are selling, they have to sell to the marketers at that rate. The CBN never promised anybody a lower rate; it is the market that determines the rate.”
However, the spokesperson for the Nigerian National Petroleum Corporation, Mr. Garba-Deen Mohammed, did not answer calls made to his mobile telephone number.
He also did not respond to a text message sent to his telephone on the matter as of the time of filing this report around 9.20pm.
But the General Secretary, Nigeria Labour Congress, Peter Ozo-Eson, said the removal of the fuel subsidy in an import-driven regime for petroleum products was the beginning of crisis.
Ozo-Eson said the NLC had warned Nigerians during the last protest it organised against the increase in the pump price that the subsidy removal would result in an uncontrollable increase in the price of the commodity.
He stated that a look at the current prices of diesel and kerosene showed that the government was only managing the current pump price of petrol to prevent people from losing faith in the decision to remove subsidy on the product without first ensuring local refining.
The labour leader argued that with an exchange rate of N400 to the dollar, the pricing template would be higher than the recommended pump price, which would result in a crisis.
Ozo-Eson stated, “If you recall what led to our strike and protest the other time, then we said that it was the beginning of a crisis to do what they had done under an import regime for petroleum products and that it would lead to a spiral that we would have no control over. And so, I do not see how the price of the PMS will remain at N145 or thereabout with the pressure on the naira, and we predicted that.
“As a matter of fact, when you look at what is happening to the prices of diesel and kerosene today, then you will realise that for now, they are just managing and holding on to the price of the PMS in order for people not to lose faith in what they have done.
“But with time, we are going to face the reality that if the naira is 400 or more to the dollar, and you now go down through the template, you are going to find that the recommended pump price will be much higher and there will be a crisis.”
He said that the government had the option to either allow the market to collapse or bring in some form of support to address the situation.
According to him, it is up to Nigerians to either endure it or mount pressure on the government to take steps to protect them.
COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020
Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.
This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.
In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.
The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.
Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.
She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.
She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.
Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.
“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.
Crude Oil, Other Commodities Closing Price for Monday
Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.
Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.
The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.
Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
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