Oil marketers have issued a stark warning that the cost of Premium Motor Spirit (PMS), commonly referred to as petrol, could escalate to between N680 and N720 per litre in the coming weeks. This forecast is contingent upon the prevailing exchange rate of the dollar at the parallel market remaining between N910 and N950.
The announcement comes amid concerns over the scarcity of foreign exchange required for PMS imports, leading dealers to postpone their importation plans. The situation has been exacerbated by the recent depreciation of the local currency, with the naira trading at over 945 per dollar at the parallel market last Friday.
Dealers in the oil sector have reported that the official foreign exchange window provided by the Central Bank of Nigeria (CBN) has remained inadequate, preventing the necessary funds—ranging from $25 million to $30 million—from being available for PMS importation.
This foreign exchange shortfall has resulted in the suspension of petrol importation by eager dealers. Even the lone importer, Emadeb, who recently brought in the commodity, is now grappling with difficulties in recovering their investment due to the naira’s decline.
Senior officials from major oil dealers have expressed concerns over an imminent hike in PMS prices if the naira continues to depreciate. The fluctuation in forex rates is now a significant determinant of petrol pricing, and experts predict that the trend will likely lead to an impending increase.
Industry leaders from various petroleum-related associations have called for government intervention to address the brewing crisis. The Major Oil Marketers Association of Nigeria, Independent Petroleum Marketers Association of Nigeria, and Petroleum Products Retail Outlets Owners Association of Nigeria have united in appealing to the Federal Government to take action.
Chinedu Ukadike, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, stressed that the surge in the demand for dollars is a key factor affecting petrol prices. He cautioned that the current trend could lead to a petrol price surge to N750 per litre if the dollar continues to appreciate.
The scarcity of dollars has compelled oil marketers to rely on the parallel market for sourcing foreign exchange. This predicament, along with the absence of subsidies on petroleum products, has made petrol prices increasingly sensitive to dollar fluctuations.
Despite the issuance of licenses to several marketers for PMS importation, it has been revealed that most dealers are refraining from importing due to the unavailability of foreign exchange. The illiquidity of the Importers and Exporters official forex window has hindered their efforts.
Clement Isong, Executive Secretary of the Major Oil Marketers Association of Nigeria, highlighted the insufficiency of funds at the official forex window and underscored the need to address security issues in the Niger Delta to boost crude oil output and increase dollar availability.
Isong acknowledged the inevitability of a potential petrol price hike if the dollar’s ascent continues but also suggested that government intervention might be employed to mitigate the situation. He emphasized that the Nigerian National Petroleum Company Limited remains a dominant importer of petrol.
Furthermore, analysts have drawn attention to the ongoing depreciation of the naira against the dollar and its direct impact on petrol prices. As the naira weakens, the cost of petrol in retail outlets is projected to rise further.
Addressing the crisis, stakeholders have urged for urgent actions, such as the revival of Nigeria’s refineries, to stabilize petrol prices. They have also called upon the government to take measures to prevent further deterioration of the naira.
Meanwhile, the Central Bank of Nigeria has attributed the naira’s ongoing decline against the dollar to the diversion of Diaspora remittances to the parallel market. The Acting Governor of the CBN, Folashodun Shonubi, raised concerns over the informal flow of Diaspora remittances into the parallel market.
As uncertainties loom, attention remains focused on the potential intervention by the Bola Tinubu administration to counter the unfolding crisis and stabilize the petrol market.