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.
Increased Demand Paves The Way for Expansion of Africa’s Sugar Industry
Africa, June 2021: A new focus report produced by the Oxford Business Group (OBG), in partnership with the International Sugar Organization (ISO), explores the potential that Africa’s sugar industry holds for growth on the back of an anticipated rise in regional demand. The report was presented to ISO members during the MECAS meeting at the Organization’s 58th Council Session, on June 17th 2021.
Titled “Sugar in Africa”, the report highlights the opportunities for investors to contribute to the industry’s development by helping to bridge infrastructure gaps in segments such as farming and refining and port facilities.
The report considers the benefits that the African Continental Free Trade Area (AfCFTA) could deliver by supporting fair intra-African sugar trade efforts and bringing regulatory frameworks under a common umbrella, which will be key to improving competitiveness.
The increased international focus on ESG standards is another topical issue examined. Here, the report charts the initiatives already under way in Africa supported by green-focused investment with sustainability at their core, which will help to instil confidence in new investors keen to adhere to ESG principles in their decision-making.
In addition, subscribers will find coverage of the impact that Covid-19 had on the industry, with detailed analysis provided of the decrease in both worldwide sugar production and prices, as movement restrictions and social-distancing measures took their toll on operations.
The report shines a spotlight on sugar production in key markets across the continent, noting regional differences in terms of output and assessing individual countries’ roles as net exporters and importers.
It also includes an interview with José Orive, Executive Director, International Sugar Organisation, in which he maps out the particularities of the African sugar industry, while sharing his thoughts on what needs to be done to promote continental trade and sustainable development.
“The region is well advanced in terms of sugar production overall, but several challenges still hinder its full potential,” he said. “It is not enough to just produce sugar; producers must be able to move it to buyers efficiently. When all negotiations related to the AfCFTA have concluded, we expect greater investment across the continent and a clearer regulatory framework.”
Karine Loehman, OBG’s Managing Director for Africa, said that while the challenges faced by Africa’s sugar producers shouldn’t be underestimated, the new report produced with the ISO pointed to an industry primed for growth on the back of anticipated increased consumption across the continent and higher levels of output in sub-Saharan Africa.
“Regional demand for sugar is expected to rise in the coming years, driven up by Africa’s population growth and drawing a line under declines triggered by the Covid-19 pandemic,” she said. “With sub-Saharan Africa’s per capita sugar consumption currently standing at around half of the global average, the opportunities to help meet increasing domestic need by boosting production are considerable.”
The study on Africa’s sugar industry forms part of a series of tailored reports that OBG is currently producing with its partners, alongside other highly relevant, go-to research tools, including a range of country-specific Growth and Recovery Outlook articles and interviews.
Global Demand for Investment Gold Plunged by 70% YoY to 161 Metric Tons in Q1 2021
Last year, investors flocked to gold as stock markets crashed on a gloomy economic outlook due to the spread of the COVID-19 pandemic. In the second quarter of 2020, global demand for investment gold surged to over 591 metric tons, the second-highest level since 2016. However, the investors’ demand for gold has dropped significantly this year.
According to data compiled by AksjeBloggen, global demand for investment gold plunged by 70% year-over-year to 161 metric tons in the first quarter of 2021.
The Lowest Quarterly Figures after Record Gold Investments in 2020
In 2016, the global gold demand amounted to 4,309 metric tons, revealed Statista and the World Gold Council data. By the end of 2019, this figure rose to 4,356 metric tons. Investment gold accounted for 30% of that amount. Worldwide gold jewelry demand volumes reached 2,118 metric tons that year. Central banks and technology followed with 648 and 326 metric tons, respectively.
Statistics show the global demand for investment gold surged amid the COVID-19 outbreak, growing by 35% YoY to almost 1,800 metric tons in 2020. Demands for gold used in technology also rose by 17% to 383.4 metric tons, while central banks and other institutions bought 326.2 metric tons of gold in 2020, a 50% plunge in a year.
However, after record gold investments in 2020, the global demand for gold for investment purposes dropped to the lowest quarterly level in years.
The Price of Gold Dropped by 5% Since January
The average gold value tends to increase during a recession, making it an attractive investment in uncertain times. In February 2019, a troy ounce of gold cost $1,320.07, revealed the Statista and World Gold Council data. By the end of that year, the price of gold rose to $1,479.13.
The gold price continued growing throughout 2020, reaching an all-time high of over $2,000 in August. By the end of the year, the precious metal price slipped to $1,864 and then rose to over $1,950 in January 2021.
However, the first quarter of the year brought a negative trend, with the price of gold falling to $1,684 by the end of March. Statistics indicate the price of gold stood at around $1,860 last week, a 5% drop since the beginning of the year.
Gold, Other Safe Haven Assets Plunge Ahead of Fed Rate Hikes
Gold and other safe-haven assets plunged last week as the Federal Reserve signals the possibility of raising interest rates twice in 2023 given the ongoing economic recovery post-COVID-19.
The price of gold dropped by 6.04 percent last week as investors rushed to move their funds out of safe-haven assets including the new gold, cryptocurrency.
The entire crypto space sheds $898 billion in market value to hover around $1.625 trillion last week, down from $2.523 trillion recorded on Wednesday 12, 2021. Its highest market capitalisation till date.
The Federal Reserve raised inflation expectations to 3.4 percent and shifted the year it is expected to increase interest rates from near-zero to 2023 from the previously projected 2024.
The new hawkish stance of the central bank led to capital outflow from safe havens and subsequently boosted dollar attraction.
The United States Dollar gained across the board with the dollar index that tracks its performance against six major currencies, rising by 0.63 percent to 91.103 last week.
However, on Monday morning the gold showed signs of recovery, gaining 0.5 percent to $1,772.34 per ounce following the retreat in U.S. treasury yield that boosted the attraction of non-yielding metal.
Bitcoin, the most dominant cryptocurrency coin, pared losses to $33,245 per coin, up from the $32,658 decline it posted last week.
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