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“The escalating cost of crude oil, combined with the devaluation of the Nigerian Naira against the United States dollar, has raised concerns among oil marketers about a potential increase in the retail price of Premium Motor Spirit, commonly known as petrol. Industry experts have noted that the recent surge in crude oil prices, reaching approximately $94 per barrel, alongside currency exchange challenges, has resulted in a gradual rise in the undisclosed subsidy spending by the Federal Government on petrol.

Experts in the downstream oil sector have explained that over 80 percent of the cost of PMS is influenced by the cost of crude oil and the exchange rate of the US dollar. Brent crude, the global oil benchmark, recently reached its highest price in 2023 at $94 per barrel, compared to its starting price of around $82 per barrel at the beginning of the year. Additionally, the Naira has depreciated further, reaching N950 per dollar in the parallel market, causing concerns about foreign exchange scarcity.

Despite the Federal Government’s insistence that petrol subsidy had ended due to the deregulation of the downstream oil sector, industry operators argue that a de facto subsidy is being implemented. They assert that with the current increase in crude oil prices, the price of petrol should logically rise. If the government maintains the petrol price at N617 per litre, it suggests that a quiet return of the subsidy on PMS has occurred.

Oil marketers point to the situation in July when petrol prices were raised to N617 per litre; at that time, crude oil prices were around $82 per barrel, and the exchange rate was not as high as N950 per dollar in the parallel market.

The Nigerian Association of Road Transport Owners (NARTO) supports the concerns raised by marketers, highlighting that the price cap on petrol has made it challenging for marketers to comply with NARTO’s demands to increase transportation costs for petrol.

While some government officials have acknowledged that the rise in crude oil prices will impact petroleum product prices, they emphasize the role of the Nigerian National Petroleum Company Limited (NNPC) in managing these challenges. They suggest that the NNPC, as the major importer of petroleum products, should be able to use its efficiency to benefit Nigerians by controlling the pricing of products in response to the higher crude oil prices.”

Previously, the National Secretary of IPMAN, Chief John Kekeocha, had urged the Federal Government to be transparent about the status of fuel subsidy rather than instructing oil marketers to adhere to specific pricing guidelines.

In August, Ajuri Ngelale, the Special Adviser to the President on Media and Publicity, informed State House correspondents that President Bola Tinubu had directed that petrol prices should not increase. Ngelale stated, “Mr. President wishes to assure Nigerians following the announcement by NNPC Limited just yesterday (Monday) that there will be no increase in the pump price of PMS anywhere in the country. We repeat, the President affirms that there will be no increase in the pump price of PMS.”

Similarly, NNPC Retail, in August, confirmed that it had no intention of raising petrol prices. The company, a downstream subsidiary of NNPC that retails refined petroleum products, assured its customers of stable prices.

Kekeocha argued that the government’s decision to impose a price cap on petrol implied the reinstatement of a subsidy on petrol. He stated, “The government lacks transparency on this issue. When you claim to have removed fuel subsidy, you should not subsequently regulate prices. It’s like speaking from both sides of the mouth. The removal of subsidy means allowing prices to fluctuate based on supply and demand. So, if NNPC says it’s obtaining forex to import products and lower prices for marketers, will they do the same for other importers? Remember the government issued import licenses to approximately seven marketers? Will they also regulate prices for them when they bring in products? No, you can’t have it both ways. If they intend to bring back subsidy, they should openly admit it, stating that they are reverting to subsidy due to the challenges the country is facing. This is because they haven’t implemented the initial necessary steps. We’ve consistently advocated for the refineries to be operational.”

NARTO raises concern
Yusuf Othman, the National President of the Nigerian Association of Road Transport Owners (NARTO), emphasized that despite the considerable operational costs in the downstream segment of the oil sector, the government had refrained from raising the pump price of PMS. He pointed out that since marketers were unable to increase their petrol prices, they couldn’t adjust their transportation costs for the carriage of PMS. This, he noted, had rendered the cost of conducting their business unmanageable for transporters.

Othman expressed NARTO’s concern over the burden of high diesel prices, highlighting that discussions with oil marketers led to the realization that the government had fixed the pump price of petrol at N617 per litre. Consequently, since they couldn’t raise petrol prices, they couldn’t increase fares for transporters. This predicament, according to Othman, left them in a difficult situation.

He urged the government to review the pump price of PMS, as this would enable marketers to consider adjusting transportation rates for transporters. He explained that without addressing the pump price issue, marketers couldn’t raise transportation costs. Failing to address this matter would compel transporters to continue parking their vehicles, resulting in disruptions to the supply chain, which they wanted to avoid.

In related news, the NNPCL (Nigerian National Petroleum Company Limited) announced the appointment of three new Executive Vice Presidents. Oritsemeyiwa Eyesan was appointed as the Executive Vice President for Upstream, Olalekan Ogunleye as the Executive Vice President for Gas, Power, and New Energy, and Adedapo Segun as the Executive Vice President for Downstream. These appointments took effect immediately, resulting in the retirement of the company’s three former Executive Vice Presidents, including Abdulkabir Ahmed (Gas, Power, and New Energies), Adokiye Tombomieye (Upstream), and Adeyemi Adetunji (Downstream). The transition from the Nigerian National Petroleum Corporation to the Nigerian National Petroleum Company Limited as a fully commercial entity was completed in July of the previous year.