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Oil marketers are maintaining their stance on a potential rise in the pump price of Premium Motor Spirit (petrol), due to a further depreciation in the naira’s value against the US dollar. The local currency’s decline from 900/dollar on Wednesday to 920/dollar on Thursday is raising concerns about the sustainability of the current petrol price.

As the exchange rate hovers around N920/$, petrol dealers shared their view that keeping the pump price at N617/litre might not be feasible. With the current exchange rate, they projected a cost ranging between N680/litre and N700/litre for petrol. They highlighted that when the petrol cost was set at N590/litre to N617/litre, the forex rate was about N750/$ to N800/$.

Although the Federal Government has asserted its stance against increasing petrol prices, oil marketers indicated that the government could be covertly subsidizing the commodity due to the prevailing exchange rate reality. As per their calculations, the projected subsidy could be around N95/litre, considering the projected cost of N680/litre.

Last week, the Nigerian Midstream and Downstream Petroleum Regulatory Authority disclosed that daily petrol consumption in Nigeria was approximately 52 million litres. If multiplied by the projected N95/litre subsidy and estimated for a month, it suggests the government might incur a fuel subsidy expense of about N153 billion monthly.

The President’s Special Adviser on Media and Publicity, Ajuri Ngelale, confirmed President Bola Tinubu’s directive that petrol prices should remain unchanged. Additionally, NNPC Retail stated that there are no plans to increase petrol prices, emphasizing their commitment to providing affordable and high-quality products at their stations nationwide.

NNPC Retail is the downstream subsidiary of NNPCL that retails refined petroleum products for the group.

IPMAN warns

It was noted last week that oil marketers had suggested the possibility of petrol prices rising to a range between N680/litre and N720/litre if the exchange rate continues to surge. On Thursday, they reiterated their standpoint, emphasizing that the ongoing decline in the naira’s exchange rate could likely lead to an increase in petrol costs, regardless of statements made by NNPC Retail (NNPCL) and the Presidency. They highlighted that the only potential solution would be if the government had resumed subsidizing fuel quietly.

Chief Chinedu Ukadike, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, reaffirmed that since petroleum products are still imported into the country, their costs are closely linked to foreign exchange rates. He pointed out that the rise in the value of the dollar would directly translate to higher petrol prices, unless NNPCL was indirectly subsidizing the costs through the Federal Government.

Ukadike also referred to the recent statement from the Special Adviser to the President on Media, indicating that the President has conveyed that fuel prices will not increase. He suggested that this indicates a quasi-deregulation scenario, where the government cushions petrol prices in response to the dollar’s fluctuation. Thus, if the dollar remains high on the parallel market, the Federal Government would likely continue to maintain petrol prices within a certain range, currently varying between N590/litre and N620/litre across different parts of Nigeria. However, in a free market context, considering the current dollar hike, petrol costs could realistically reach around N680/litre to N700/litre.

Additionally, Mohammed Shuaibu, the Secretary of IPMAN, Abuja-Suleja, emphasized that the petroleum products market is heavily influenced by forex rates. He noted that though the government had denied the possibility of fuel price hikes amid the dollar’s surge, the current situation necessitates swift action to prevent a crisis. Indigenous marketers might halt importing products due to the dollar’s rate, and the petrol being consumed could be from existing reserves. The status of product shipments remains uncertain.

Marketers shun importation

“However, what I know is that no marketer wants to go and import petrol again. Everyone is careful right now. That is why people are saying that the government is going to bring back fuel subsidy, particularly with what happened in Kenya recently,” Shuaibu stated.

He pointed out that “when nobody wants to import, automatically the government has to do something internally or secretly because it had already come out to tell the public that it would not go back to fuel subsidy and would not increase the pump price of petrol. So which magic is it going to do?”

Earlier, the President, of Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, explained that in practical terms one would say subsidy on petrol had returned.

Gillis-Harry said, “We heard the President’s firm commitment to keeping deregulation on stream and also to ensure the sustenance of subsidy removal. One would say there is subsidy, going by the rising forex and crude oil prices, but since the President said no return of subsidy, let’s take it that way.”

FG replies Obaseki

In a related development, the Federal Government on Thursday tackled Edo State Governor Godwin Obaseki over his comments that the removal of fuel subsidy and foreign exchange reforms of President Bola Tinubu’s administration has led to increased hardship for Nigerians.

The Minister of Information & National Orientation, Mallam Mohammed Idris, in a statement, said Obaseki was trying to cover his “poor performance” in the state by hiding under his criticisms of the FG’s policy on fuel subsidy removal.

He noted that it was on record that Nigerians and other global bodies called for the removal of fuel subsidy.

Obaseki had while addressing journalists in Edo said the FG did not know what was next after the removal of fuel subsidy which he said he warned against.

The governor said, “I am shocked that people who campaigned around the country, saying that they will remove subsidies, had no clear plans on what to do after subsidy removal. They don’t know what to do and how to support those who will be victims of subsidy removal.

“I am shocked and scared of what we are passing through today, where the government doesn’t seem to have a plan or solution on how to respond to the consequences of the policy measure put in place by their administration.”

But Idris said, “Governor Obaseki has, in recent times, shifted focus to the nation’s economic challenges as cannon fodder to divert attention from his poor performance at the state level since his move to the Peoples Democratic Party. While it is common for leaders to have divergent views, it’s crucial to align criticism with reality, and to premise discourse on tangible results.

“Governor Obaseki’s comments regarding the All Progressives Congress-led Federal Government’s decisions on fuel subsidy and foreign exchange market reforms perhaps overlooked the broader economic picture. It’s well documented that Nigerians, state governors across party lines, and global institutions—including the World Bank and the IMF—along with various economic experts, have consistently advocated the removal of fuel subsidy because of the fiscal distortions and burden it has placed on the economy.”

He added that Obaseki’s leadership had notably benefited from the fuel subsidy removal, which is evident in the more than doubling of the FAAC allocation between June and July 2023 to Edo State – more than it had ever received pre-fuel subsidy removal.

“Constitutionally, Governor Obaseki is a member of the National Economic Council where far-reaching decisions were taken on the issues he talked about, in his media address by his colleagues, while sitting in-Council with the Vice President, Senator Kashim Shettima. Even as Governor Obaseki will have an explanation to make to the people of his state on why he was absent at the two NEC meetings under the current administration,” he added.

“The Federal Government understands the current difficulties Nigerians are facing and is working very hard with the states and local governments to bring succour to our people. President Tinubu is guiding our country through very challenging times. We are supremely confident that we will soon turn the corner into a prosperous future.” the minister said.

The Nigeria Labour Congress, on Thursday, said it would return to the status quo should there be any further hike in the price of petrol.

This is as the Trade Union Congress demanded a thorough probe of the Nigerian National Petroleum Company Limited.

The National Treasurer of NLC, Hakeem Ambali, and the National Deputy President of TUC, Tommy Etim, made these known in separate interviews with one of our correspondents in Abuja.

The PUNCH reports that earlier, the NLC National President, Joe Ajaero, had warned the government against any further increment in the price of fuel.

The naira continued its weak trading on Thursday at the parallel market despite the attempts by the Central Bank of Nigeria to stabilise it.

In chats with The PUNCH, two Abuja-based Bureau De Change operators late Thursday said the naira sold for between 916/dollar and 920/dollar. They said they bought the greenback between N895 and N905.

One BDC operator, Magaji Tau, told The PUNCH that he sold at the rate of N916/dollar and bought for N900/dollar on Thursday.

Another operator, who identified himself as Abubakar said that he sold one American dollar at N920 and bought at N895.

In Lagos, a BDC operator, Hamed Abubakar, who is based at Allen Avenue, Ikeja, Lagos, said he sold the greenback at 920/dollar and bought at 900/dollar.

Also, Jubril Mohammed, a BDC at Ojodu Berger area of Lagos, sold and bought the US dollar at N920 and N900.

On the official trading platform, the Investors $ Exporter window, the naira closed trading at N771.69/dollar compared to the N773.42/ dollar recorded on Wednesday.

At the close of Thursday’s trading, the daily turnover stood at $ 121.60m.

The naira had tumbled to 900/dollar at the parallel market on Wednesday.

The CBN had threatened to revoke the operating licences of BDCs that violated its rules.

Last Friday, the apex bank announced an operational mechanism for the BDCs to trade foreign currencies at a similar rate obtainable on the Investor & Exporter forex window.

It gave the directive to BDCs in a circular dated August 17, 2023, and titled, ‘Operational mechanism for Bureau de Change operations in Nigeria.’

It read in part, “The spread on buying and selling by BDC operators shall be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian exchange market window weighted average rate of the previous day.

“Mandatory rendition by BDC operators of the statutory periodic reports (daily, weekly, monthly, quarterly and yearly), on the financial institution forex rendition system which has been upgraded to meet operators’ requirements.”

‘Visit refineries’

Meanwhile, the oil marketers called on the President to personally inspect Nigeria’s refineries and ensure that the facilities were revamped.

Shuaibu said, “We have four refineries in this country and a lot of money has gone into fixing them. The President in his wisdom should move quickly and even go and inspect one of them to understand the level of work that has been done there.

“The Port Harcourt refinery, for instance, should be taken as a priority project. He should go there, see the contractor and ask questions, as this will make the handlers apprehensive.

 “By the time he does this, maybe one of the refineries will come on stream and we will start local production of fuel.”

Ukadike corroborated the position of his oil marketing colleague, by stating, “The Federal Government should ensure that our four refineries are working. It should ensure that crude oil is given to modular refineries, particularly to those producing Automotive Gas Oil (diesel), because the cost of AGO is going high too.

“We are very devastated with the things that are happening now. A truck of PMS now goes for between N27m to N30m. How can ordinary Nigerians doing business afford that? And at the end of the day, our profit margin still remains the same. So the country is not balanced.

“The Federal Government has to do something very fast to ensure that we earn more and more dollars as a nation. It must get the refineries running. The President should set up a committee that should be giving him day-to-day updates on the refineries.”