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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