Naira Float Sparks Concerns as Petrol Prices Set to Surge to N650 per Litre

Industry experts are warning that the recent floating of the naira will necessitate a reassessment of the assumptions that led to the pegging of petrol prices at N488 per litre in Lagos. They predict that the price of petrol outside of Lagos, where imported petroleum products are received, could soar to N650 per litre.

The Nigerian National Petroleum Company Limited (NNPCL), the state-owned oil company, recently issued price guidance for its network of over 900 retail petrol stations, which other marketers promptly adopted. However, these assumptions will need to be revised as the naira rates converge with the parallel market rate, currently trading above N750/$1.

Investors King previously reported that petrol prices at the pump would be determined by the eventual exchange rate, given Nigeria’s lack of refining capacity and its dependence on imported petroleum products.

According to the current petrol pricing template, the pump price of petroleum products in Lagos would be above N590 per litre. If the rate converges at N750 as predicted by some bankers, petrol prices will surge, resulting in the most efficient operator offering relatively cheaper prices.

An analysis of the pricing template reveals that the product cost is estimated at N503.91 per litre. Additional costs, including trader’s margin, freight, NPA port charges, NIMASA, financing costs, jetty storage, and wholesale margin, contribute to the landing cost of N565.34. When retailers’ margins, dealers’ margins, and transport costs are factored in, the price in Lagos rises to N590.34.

Calculations suggest that the price could average between N600 and N650 per litre when petrol is transported across Nigeria. Marketers are scrambling to guarantee supply amid lower inventories and the NNPC’s requirement that they procure products at the new rate.

Mike Osatuyi, the national operations controller of IPMAN, expressed concerns about the increase in ex-depot prices, which would eventually force marketers to raise prices. He questioned how they could sell at the previous rates if they purchased petrol at N480/N495.