Following a further drop in the value of the naira versus the US dollar, oil marketers insisted on a probable increase in the pump price of Premium Motor Spirit, also known as petrol, on Thursday.
On the illegal market, the local currency fell from 900/dollar on Wednesday to 920/dollar on Thursday, raising more questions about whether the current pump price of petrol could be sold.
Last week, the naira recovered from a two-week low of 945/dollar on the parallel market.
However, the local currency began to fall this week, unsettling economic managers and stakeholders in the oil and gas sector.
On Thursday, oil traders and marketers informed The PUNCH that with the currency rate at N920/$, the pump price of petrol could not stay at N617/litre, especially if the current exchange rate remained.
They anticipated a cost of N680/litre to N700/litre for PMS based on an exchange rate of N920/litre, emphasizing that the FX rate was approximately N750/$ to N800/$ at the time the cost of petrol was set at N590/litre to N617/litre.
However, oil marketers pointed out that because the Federal Government insisted on not raising the price of gasoline, it must be “secretly subsidizing the commodity based on the prevalent exchange rate reality.”
According to forecasts and analyses of oil marketers and dealers, the Federal Government may be spending around N90 as a subsidy on gasoline due to the collapse of the local currency against the dollar.
On Thursday, the ex-depot price of petrol was reported to be around N585/litre. Based on the current exchange rate, the expected cost of N680/litre implies that the government may be obliged to spend N95/litre as a subsidy.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority said last week that the country’s daily petrol consumption was at 52 million litres.
When multiplied by the estimated N95/litre projected subsidy and calculated for a month, this suggests that the government may be obliged to spend around N153 billion on fuel subsidies each month.
Ajuri Ngelale, the Special Adviser to the President on Media and Publicity, informed State House media last week that President Bola Tinubu has directed that petrol prices not rise.
“Mr President wishes to reassure Nigerians that there will be no increase in the pump price of PMS anywhere in the country, as announced by the NNPC Limited just yesterday (Monday).” “We reiterate that the President has stated that there will be no increase in the price of PMS at the pump,” he said.
Last week, NNPCL also stepped out in response to public worry about a likely increase in petrol pump prices.
“Dear valued customers, we at NNPC Retail appreciate your business and do not intend to raise our PMS pump prices as has been widely speculated.” “Please purchase the highest quality products at the most competitive prices at our NNPC Retail stations across the country,” the firm stated.
NNPC Retail is NNPCL’s downstream division that sells refined petroleum products to the group.
IPMAN issues a warning.
Remember that oil marketers predicted last week that the price of gasoline would jump to between N680/litre and N720/litre in the coming weeks if the exchange rate spike continued.
They stressed again on Thursday that because the naira’s depreciation had not abated in the last few days, the price of gasoline would certainly rise regardless of NNPCL and the Presidency’s positions, emphasizing that the only solution was if the government had quietly returned fuel subsidies.
“I still maintain that it has to do with forex because we are still importing petroleum products into this country.” And when it comes to FX, that implies that a lot of naira will be chasing a few dollars.
“And because we don’t have an influx of dollars into Nigeria, the landing cost of petrol will continue to rise as long as the dollar rises,” said Chief Chinedu Ukadike, National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria.
“A rise in the dollar automatically leads to an increase in the cost of petroleum products, unless the NNPCL is subsidizing it through the Federal Government,” he noted. I also recall the Special Adviser to the President on Media’s previous comments, in which he stated that he received a brief from the president stating that the fuel price will not rise.
“This implies that there is quasi-deregulation and that Mr. President is cushioning the price of petroleum products relative to the dollar.” So, if the dollar rises in the parallel market, it signifies that the Federal Government will continue to keep petrol prices within a price regime, whatever the outcome.
“And that regime currently ranges from N590/litre to N620/litre, depending on where you buy it in Nigeria.” However, if you allow the product to sell at the free market price, with regard to the present dollar rise, the cost of petrol should be between N680 and N700/litre.”
Speaking on the subject, Mohammed Shuaibu, Secretary, IPMAN, Abuja-Suleja, stated that the petroleum products market today is mostly driven by currencies.
“Of course, there was panic when the dollar was on the verge of reaching N1,000, which is why the government is supposed to act quickly to avert a crisis.” The government refuted predictions of fuel price increases.
“However, due to the current state of the dollar, no indigenous marketer will be able to bring in this product.” The petrol that is currently being consumed comes from the reserve, but we do not know what the government’s goal is. I’m not sure if any ships are currently bringing in products.
[i]Marketers avoid importing[/i]
“However, I know that no marketer wants to go back and import petrol.” Everyone is being cautious right now. That is why some are speculating that the government may reinstate fuel subsidies, particularly in light of recent events in Kenya,” Shuaibu added.
He stated that “when no one wants to import, the government has to do something internally or secretly because it had already come out to tell the public that it would not return to fuel subsidies and would not raise the price of petrol at the pump.” So, what magic will it perform?”
Earlier, Billy Gillis-Harry, President of the Petroleum Products Retail Outlets Owners Association of Nigeria, indicated that in practice, the subsidy on petrol has returned.
“We heard the President’s firm commitment to keeping deregulation on track, as well as to ensuring the sustainability of subsidy removal,” Gillis-Harry remarked. Going by rising FX and crude oil prices, one might conclude that there is subsidy, but since the President stated that there will be no return of subsidy, let’s consider it that way.”
FG responds to Obaseki
In a similar event, the Federal Government chastised Edo State Governor Godwin Obaseki on Thursday for saying that President Bola Tinubu’s administration’s withdrawal of fuel subsidies and foreign exchange reforms had resulted in increased hardship for Nigerians.
In a statement, the Minister of Information and National Orientation, Mallam Mohammed Idris, said Obaseki was trying to hide his “poor performance” in the state by criticizing the Federal Government’s policy on gasoline subsidy removal.
He stated that Nigerians and other global groups had publicly advocated for the elimination of gasoline subsidies.
Obaseki had told journalists in Edo that the FG did not know what would happen next after the elimination of fuel subsidies, which he had cautioned against.
“I am shocked that people who campaigned across the country saying they will remove subsidies had no clear plans on what to do after subsidy removal,” the governor remarked. They are unsure what to do or how to assist people who will be affected by the elimination of subsidies.
“I am shocked and terrified by what we are witnessing today, in which the government appears to lack a plan or solution for dealing with the consequences of their administration’s policy measures.”
“Governor Obaseki has recently shifted focus to the nation’s economic challenges as cannon fodder to divert attention away from his poor performance at the state level since joining the Peoples Democratic Party,” Idris stated. While it is usual for leaders to hold opposing viewpoints, it is critical to match criticism with reality and to base discourse on measurable outcomes.
“Governor Obaseki’s remarks about the All Progressives Congress-led Federal Government’s decisions on fuel subsidies and foreign exchange market reforms may have overlooked the larger economic picture.” It is well documented that Nigerians, state governors from all political parties, and global institutions such as the World Bank and the IMF, as well as various economic experts, have consistently advocated for the elimination of fuel subsidies due to the fiscal distortions and burden they have placed on the economy.”
He said that Obaseki’s leadership had profited significantly from the removal of fuel subsidies, as seen by the more than doubling of Edo State’s FAAC allocation between June and July 2023 – more than it had ever received prior to the abolition of gasoline subsidies.
“Constitutionally, Governor Obaseki is a member of the National Economic Council, where far-reaching decisions on the issues he discussed in his media address were made by his colleagues while sitting in Council with the Vice President, Senator Kashim Shettima.” Even though Governor Obaseki would have to explain to the people of his state why he was absent from the two NEC meetings held during the current government,” he noted.
“The Federal Government recognizes the current challenges that Nigerians face and is working tirelessly with states and local governments to bring relief to our people.” President Tinubu is leading our country through difficult times. We are hopeful that we will soon be able to turn the corner into a successful future.” stated the minister.
The Nigeria Labour Congress stated on Thursday that if the price of gasoline rises further, it will return to the status quo.
The Nigerian National Petroleum Company Limited is being investigated thoroughly, according to the Trade Union Congress.
The National Treasurer of the NLC, Hakeem Ambali, and the National Deputy President of the TUC, Tommy Etim, both confirmed this to one of our journalists in Abuja.
According to the PUNCH, the NLC National President, Joe Ajaero, had already warned the government against any future increases in petrol prices.
The naira remained weak in the parallel market on Thursday, despite efforts by the Central Bank of Nigeria to stabilize it.
Two Abuja-based Bureau De Change operators told The PUNCH late Thursday that the naira sold for between 916/dollar and 920/dollar. They claimed to have purchased the greenback between N895 and N905.
On Thursday, one BDC operator, Magaji Tau, told The PUNCH that he sold at N916/dollar and purchased at N900/dollar.
Another operator, Abubakar, stated that he sold one American dollar for N920 and bought one with N895.
In Lagos, Hamed Abubakar, a BDC operator situated on Allen Avenue in Ikeja, Lagos, said he sold the greenback at 920/dollar and purchased it at 900/dollar.
In addition, Jubril Mohammed, a BDC in Lagos’ Ojodu Berger area, traded and bought the US dollar at N920 and N900.
The naira concluded trading at N771.69/dollar on the official trading platform, the Investors $ Exporter window, compared to N773.42/dollar on Wednesday.
The daily turnover was $ 121.60m at the end of trade on Thursday.
On Wednesday, the naira fell to 900/dollar in the parallel market.
The CBN has threatened to remove BDCs’ operating licenses if they broke its guidelines.
The apex bank established last Friday an operational framework for BDCs to trade foreign currency at the same rate as the Investor & Exporter forex window.
It issued the directive to BDCs in a circular dated August 17, 2023 and headlined ‘Operational mechanism for Bureau de Change activities in Nigeria.’
It said, in part, that “the spread on buying and selling by BDC operators shall be within an allowable limit of -2.5 percent to +2.5 percent of the previous day’s Nigerian exchange market window weighted average rate.”
“Mandatory rendition by BDC operators of statutory periodic reports (daily, weekly, monthly, quarterly, and yearly), on the financial institution forex rendition system, which has been upgraded to meet operators’ requirements.”
‘Go to refineries.’
Meanwhile, oil merchants urged President Buhari to personally tour Nigeria’s refineries and ensure that they were modernized.
“We have four refineries in this country, and a lot of money has gone into fixing them,” Shuaibu remarked. In his wisdom, the President should move fast and even inspect one of them to grasp the degree of work that has been done there.
“The Port Harcourt refinery, for example, should be prioritized.” He should go there, meet with the contractor, and ask questions, as this will frighten the handlers.
“By the time he does this, one of the refineries may have come online, and we will be able to start producing fuel locally.”
“The Federal Government should ensure that our four refineries are operational,” Ukadike said, echoing the sentiments of his oil marketing colleague. It should ensure that crude oil is delivered to modular refineries, particularly those generating Automotive Gas Oil (diesel), because the price of AGO is also rising.
“We are devastated by what is happening right now.” PMS trucks now cost between N27m and N30m. What regular Nigerians doing business can afford? And, at the end of the day, our profit margin remains unchanged. As a result, the country is unbalanced.
“The federal government must act quickly to ensure that we earn more and more dollars as a nation.” It must restart the refineries. The President should form a team to provide him with daily information on the refineries.”