Petrol price increase looms in Nigeria.

June 4, 2024

297

Petrol price increase looms in Nigeria as landing cost jumps 47% to N1,026 per liter.

Here’s a breakdown of the issue:

Landing Cost Increase: The cost of importing petrol (PMS) has jumped by 46.8% year-on-year to N1,026.71 per litre in May 2024 (compared to N545.83 in May 2023).
Additional Costs: On top of the landing cost, other charges like transportation and marketer margins would push the final price at gas stations to nearly N1,052 per litre.
Marketers’ Concerns:
- Difficulty obtaining foreign exchange (FX) at a good rate.
- Rising global crude oil prices.
- Unprofitability of importing at the current pump price (government hasn’t allowed free market pricing).
NNPCL as Sole Importer: Due to the above reasons, private marketers are hesitant to import, leaving the Nigerian National Petroleum Company (NNPCL) as the sole importer.
Potential Losses: A transactional analysis suggests marketers could face losses exceeding N19 billion if they import at current costs and sell at the pump price.
NBS Price Data: The National Bureau of Statistics (NBS) confirms a YoY increase of 176% in the national average retail price of petrol (April 2024 vs. April 2023).

Overall Impact:

Nigerians are likely to face a petrol price hike soon.
The high cost of petrol could lead to increased transportation costs and subsequently higher prices for goods and services.
The current situation highlights the challenges of the subsidy system:
- Discourages private investment in fuel imports.
- Potentially encourages smuggling of subsidized petrol to neighboring countries.
- Puts a strain on the national budget.

Expert Opinions:

Robert Dickerman (Pinnacle Oil CEO) estimates Nigeria spends N1 trillion monthly on petrol subsidies.
IMF suggests the government is indirectly subsidizing petrol through backdoor measures

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