The Naira’s recent depreciation against the Dollar has raised concerns that fuel marketers in Nigeria might be compelled to increase the pump price of fuel. This decision looms despite a slight weekly moderation in crude oil prices.
Last week, the Naira weakened against the Dollar on the parallel market, dropping from 920 naira/dollar. This unfavorable exchange rate has ignited apprehension over the sustainability of the current gasoline prices.
Industry insiders have indicated that when the petrol prices were initially set at around N590/litre to N617/litre, the exchange rate ranged from approximately N750 to N800/$. However, with the Naira sliding to around 920/$, the estimated cost of petrol is now projected to be between N680/litre to N700/litre.
Although crude oil prices experienced a small increase on Friday, they are still heading for a second consecutive week of losses. The anticipation of Federal Reserve Chairman Jerome Powell’s speech has stabilized the dollar. Despite earlier supply concerns, crude oil prices for the week are predicted to decrease between 1.2% and 2.2%.
The Naira’s decline is further aggravated by the cautious trading behavior of currency traders in anticipation of Powell’s remarks at the Jackson Hole symposium. The strengthening dollar, driven by this caution, has reached a 10-week high, contributing to its largest one-month gain. This strengthening dollar has a cascading effect, increasing the cost for Nigerian fuel marketers to import oil.
The dollar gained traction prior to the start of the Jackson Hole event due to shifts in Fed futures prices, signaling a greater than 50% likelihood of another Fed rate hike in the coming month.
In the midst of these market dynamics, it has been noted that President Bola Tinubu has issued instructions to maintain current fuel prices. Ajuri Ngelale, the president’s special adviser on communications and advertising, conveyed this directive to ensure price stability amidst the evolving economic landscape.
