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Naira’s Slide and Crude Oil Surge Trigger Apprehension Over Possible Petrol Price Hike

As the Nigerian naira experiences a downward spiral against the mighty US dollar, combined with recent surges in global crude oil prices, a wave of unease has washed over the nation, fueled by concerns of an impending increase in the cost of Premium Motor Spirit (PMS), colloquially known as petrol.

While the Nigerian National Petroleum Company Limited and other key oil marketers have yet to formally declare any adjustments to petrol prices, they acknowledged the pivotal role that foreign exchange scarcity and the ascent in crude oil values play in shaping PMS pricing.

The journey of petrol pricing paints a telling picture. From its base of N198 per litre in May, the price catapulted past the N500 per litre threshold in June, immediately after President Bola Tinubu removed the PMS subsidy. This ascent continued, reaching over N600 per litre in July. Alas, concerns linger that this upward trajectory may persist into August, driven by the unsettling plunge of the naira against the robust US dollar.

In a disconcerting twist, the naira plummeted below N900 against the dollar at the parallel market, mirroring a similar dip in its value at the official Importers and Exporters forex window. Meanwhile, Brent, the globally-acknowledged benchmark for crude oil, shifted gears, exchanging hands at approximately $87 per barrel, having hovered below the $80 per barrel mark just weeks earlier.

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Collins Nnabude, a resident of Abuja, expressed his anxiety, stating, “The decline of the naira against the dollar and the recent surge in crude oil prices are leaving one wary, especially considering their impact on petrol prices in Nigeria. It seems likely that fuel prices may rise again this month.”

Oil marketers lent credence to these fears, revealing the potential for another petrol price hike within the same month.

President of the Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, affirmed, “As long as the naira continues to lose ground against the dollar, petrol prices at our retail outlets will persist in their ascent.”

Gillis-Harry called upon President Tinubu to prioritize the revival of Nigeria’s dormant refineries. He emphasized, “We have urged the President to declare a state of emergency on our refineries to expedite their rehabilitation. This is the most viable route to predict the trajectory of petroleum product prices, given that at present, every unit of PMS purchased from retail outlets is subject to the dollar’s fluctuations.”

Addressing the situation, the National President of the Independent Petroleum Marketers Association of Nigeria, Chinedu Okonkwo, clarified that the downstream oil sector had fully embraced deregulation, underscoring that the cost of PMS would continue its oscillations.

Okonkwo elucidated, “In an era of deregulation and the absence of subsidy, the price of petrol will naturally ebb and flow. However, if one aims to exploit the situation, those who supply and sell at more affordable rates will render such endeavors untenable.”

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Additionally, oil marketers revealed that the Federal Government might intervene as both crude oil prices and ex-depot petrol prices maintain their upward momentum.

Mike Osatuyi, the National Controller Operations of the Independent Petroleum Marketers Association of Nigeria, affirmed that President Tinubu had expressed a willingness to step in if necessary.

Osatuyi remarked, “Firstly, we must commend President Tinubu for scrapping fuel subsidies, as the nation would have shouldered a colossal burden otherwise. In light of the escalating crude oil prices, we can discern a drop in the quantity of petrol consumption they previously projected. Concurrently, we acknowledge the surge in crude oil prices, signifying that Nigeria will amass additional revenue alongside the savings accrued from the subsidy removal. With this enhanced financial standing, we must reckon with rising petrol prices.”

He added, “The ex-depot price now fluctuates between N585 and N590 per litre, contingent on the depot, and it will fluctuate further based on crude prices and exchange rates. Yet, the President has assured us of potential interventions when the need arises. Thus, we trust they are vigilantly monitoring the evolving scenario.”

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