Fuel Price Tension Builds as Crude Oil Soars and Naira Weakens Against the Dollar

The surge in global crude oil prices, combined with the devaluation of the Nigerian naira against the US dollar, is raising concerns of a potential increase in the pump price of Premium Motor Spirit (PMS), commonly known as petrol, in Nigeria.

Brent crude, the international benchmark for oil, recently reached $94 per barrel, marking the highest price point in 2023. This increase follows a fluctuating trend that started the year at around $82 per barrel, dipped to $70 per barrel in June, and has now exceeded $92 per barrel.

Concurrently, the naira has further depreciated against the US dollar, reaching 950 naira per dollar in the parallel market.

While the Federal Government and the Nigerian National Petroleum Company Limited have maintained that petrol subsidies have ended due to downstream oil sector deregulation, industry operators argue that a form of quasi-subsidy is still in effect.

These operators contend that with the recent surge in crude oil prices, the cost of petrol should naturally rise. They assert that if the government insists on keeping petrol prices at 617 naira per liter, it effectively implies a quiet return to subsidy on PMS.

Notably, in July, when the cost of petrol was raised to 617 naira per liter, crude oil was trading around $82 per barrel, and the exchange rate was lower than the current 950 naira per dollar in the parallel market.

The Nigerian Association of Road Transport Owners (NARTO) echoed the concerns of industry stakeholders, emphasizing that the price cap on petrol has made it challenging for marketers to meet the demands of increased transportation costs associated with the product.

Industry leaders are watching closely as the cost of crude oil continues to rise, acknowledging its direct impact on petrol prices, as PMS is derived from crude. The government’s stance and the Nigerian National Petroleum Corporation’s management of the situation will play a crucial role in determining the future trajectory of fuel prices for Nigerians.

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