The cost of Premium Motor Spirit (PMS) has risen as much as N650 in some parts of Nigeria, following a jump in the price of crude oil in the international market and the poor performance of the naira in the forex market.
This is coming weeks after President Bola Tinubu announced the removal of fuel subsidy, and the central bank’s decision to float the FX market.
Petrol stations have begun to adjust their pump prices to reflect the changes in the markets. In June, the National Controller Operations, Independent Petroleum Marketers Association of Nigeria, Mike Osatuyi, warned that PMS prices will likely rise in July, as market fundamentals become the major determinant of the prices.
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“What I am seeing is around N600 and above, depending on the exchange rate, the current crude price at the international market, and the landing cost. Those in Lagos will pay around N600, those outside Lagos around N600 plus, while those in the north would be paying anything from N700 and above,” he said.
Though the Independent Petroleum Marketers Association of Nigeria (IPMAN) debunked the report, saying the association has no plans to increase pump prices for now, the jump in fuel costs has proved Osatuyi right.
In Lagos and the Federal Capital Territory (FCT) Abuja, the price rose to N617 and N640, while in Ondo and Kano states; it sells for N650 and N620 per liter.
The prices are expected to go up in northern states like Sokoto and Maiduguri because of higher transportation costs emanating from moving the products from Lagos to the far north.
Mele Kyari, the group chief executive officer of the Nigerian National Petroleum Company Limited (NNPCL), said on Tuesday that the increase was determined by market forces.
Besides Brent crude price rising to $78.86 per barrel, naira’s performance in the forex market contributed immensely to the current price of fuel. The naira has slumped below N800/$1 in the Investor and Exporter, forcing an increase in the price of goods and services. This also means that the price of petroleum products will rise accordingly.
Marketers had in June explained that Nigerians were able to buy fuel below N600 per liter because they were still loading petroleum products at a government price of N496.50 per liter. But with the old stock out and new products arriving at higher landing costs based on current forex realities; it’s realistic to expect an increase in pump prices.
While Dangote Refinery is yet to begin operation as expected this month, consumers are counting on competition to drive the price down.
Ahmed Farouk, Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), said the agency plans to issue more licenses to petrol importers. According to Farouk, more than 56 companies applied for import licenses to bring in petrol, but only 10 of them showed a commitment to import. Among these, Emadeb Energy, A.Y Shafa, and Prudent Energy successfully imported petrol into the country.
However, the increase in fuel prices means that Nigeria’s inflation is going to see a further spike as the cost of living soars. The Nigerian Bureau of Statistics announced on Monday that inflation rose to 22.79% in June, driven by the rise in the cost of goods and services that includes fuel.
The impact of this on businesses, which rely largely on generators for electricity supply, is expected to be severe. Many businesses are expected to shut down if the government does not act fast to mitigate the impact of fuel subsidy removal.
Meanwhile, the total fuel consumed in Nigeria has since dropped, post the removal of fuel subsidy.
He added that this represents a 35% reduction when compared with the 65 million litres per day, prior to subsidy removal, citing that, the daily average truck out after the announcement of the subsidy removal on May 29, dropped to 46.38 million litres per day. The fuel regulator chief, said this is a significant reduction when compared to previous months saying:
“The current daily consumption has drastically reduced as against 65 million litres which had been the daily consumption before subsidy removal.
“In January, it was 62 million litres per day; February, 62 million litres per day; March, 71.4 million litres per day; April, 67.7 million litres per day; May 66.6 million litres per day; June, 49. 5 million litres per day and July, 46.3 million litres per day,”.