Oil marketers have raised concerns over a possible increase in the pump price of Premium Motor Spirit (PMS), commonly known as petrol, as the value of the Nigerian naira continues to decline against the United States dollar.
The naira’s exchange rate on the black market fell from N900/dollar on Wednesday to N920/dollar on Thursday, sparking worries about the sustainability of the current petrol price.
A few weeks ago, the naira reached N945/dollar on the parallel market but subsequently recovered.
However, it has once again started depreciating this week, causing unease among economic stakeholders and those in the oil and gas sector.
Oil dealers and marketers argue that with the exchange rate of N920/$, the current petrol price of N617/litre cannot be maintained.
They project a cost of between N680/litre to N700/litre for PMS, considering the N920/$ exchange rate. They explained that when petrol prices were set at N590/litre to N617/litre, the forex rate was around N750/$ to N800/$.
While the Federal Government has insisted on not increasing petrol prices, the oil marketers believe that the government may be secretly subsidizing the commodity based on the current exchange rate reality.
This implies that the government might be spending approximately N90 as subsidy on petrol due to the naira’s depreciation against the dollar.
The ex-depot price of petrol was reported to be around N585/litre on Thursday. With the projected cost of N680/litre, it suggests that the government might need to spend about N95/litre as subsidy.
Given that petrol consumption in Nigeria is approximately 52 million litres daily, this could lead to a monthly expenditure of about N153 billion on fuel subsidy.
Despite assurances from the President and the Nigerian National Petroleum Corporation Limited (NNPCL) that there would be no increase in the pump price of PMS, oil marketers insist that rising exchange rates could drive up petrol prices.
They argue that the only way to maintain the current prices is if the government is quietly subsidizing fuel.
The Nigeria Labour Congress (NLC) has also warned that it will revert to the status quo should there be any further petrol price hike.
The Trade Union Congress (TUC) has called for a thorough investigation of the Nigerian National Petroleum Company Limited (NNPC) in response to the ongoing concerns.
The naira’s continued weakness in the parallel market has exacerbated the situation, despite efforts by the Central Bank of Nigeria to stabilize it.
Bureau De Change operators reported selling rates between 916/dollar and 920/dollar, further highlighting the currency’s vulnerability.
Oil marketers have called on the President to personally inspect Nigeria’s refineries and ensure their revitalization.
They believe that with the refineries in operation, the country can reduce its dependence on imported petroleum products, ultimately stabilizing fuel prices and the exchange rate.
