Impending petrol price increase: Marketers warn of N720/liter amid dollar surge
Oil marketers have issued a stern warning that the price of Premium Motor Spirit (PMS), commonly known as petrol, could escalate to an alarming range of N680 to N720 per liter.
This anticipated price hike is contingent upon the prevailing dollar exchange rate in the parallel market, projected to fluctuate between N910 and N950.
Marketers have highlighted that the dearth of foreign exchange coupled with the escalating dollar rate has placed a substantial burden on dealers seeking to import PMS, compelling them to put their import plans on hold.
Foreign Exchange Dilemma and PMS Importation
The scarcity of foreign exchange has been a prominent challenge for oil dealers keen on importing PMS.
Despite the presence of the Central Bank of Nigeria’s (CBN) Importers and Exporters official window with a comparatively lower exchange rate of approximately $740 per liter, it remains illiquid and inadequate to cater to the substantial sums, ranging from $25 million to $30 million, requisite for PMS importation.
This predicament has triggered the suspension of petrol importation by dealers, who initially showed eagerness to meet the demand for this essential commodity.
Dollar Depreciation and Investment Implications
The only marketer, Emadeb, that recently ventured into PMS importation is now grappling with the challenges posed by the depreciation of the naira.
This depreciation has hampered their efforts to recoup their investments effectively. The senior officials of major oil dealers, in separate interviews, revealed their concerns regarding the inevitable surge in PMS prices unless there is a substantial appreciation of the local currency in the forthcoming weeks.
Industry Leaders’ Call for Government Intervention
Prominent industry bodies, including the Major Oil Marketers Association of Nigeria, Independent Petroleum Marketers Association of Nigeria, and Petroleum Products Retail Outlets Owners Association of Nigeria, have united in urging the Federal Government to intervene decisively to address the burgeoning crisis.
The demand-supply dynamics of forex have become a driving force behind the fluctuating petrol prices, signifying that an impending price hike is imminent.
Fluctuations in Forex: A Key Driver
Chief Chinedu Ukadike, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, highlighted the critical role played by forex fluctuations in shaping petrol prices.
He emphasized that the slackening of the naira against the dollar and the surging demand for dollars from diverse sectors, including petroleum product importers and other manufacturers, are key drivers behind the mounting pressure on petrol prices. As the dollar inches closer to N1,000, Nigerians may have to brace themselves for PMS prices potentially reaching N750 per liter.
Market Dynamics and Parallel Market Sourcing
Despite the CBN’s official window, which is grappling with liquidity issues, oil marketers are still compelled to source dollars from the parallel market.
This situation underscores the challenges faced not only by petroleum product marketers but also by various importers across Nigeria. With the elimination of subsidies on petroleum products, price fluctuations have become intricately linked with forex dynamics, necessitating vigilance on the part of consumers.
Import Dynamics and Depreciating Naira
The Nigerian National Petroleum Company Limited remains a pivotal importer of petrol into the country.
However, the recent foray by another importer, Emadeb, underlines the complexities associated with imports. Given that petroleum product sales are denominated in naira while the imports are dollar-driven, the naira’s depreciation poses a substantial hurdle for independent importers.
This disparity contributes to the challenges faced by such importers in recouping their funds efficiently.
Future Price Adjustments and NNPC’s Role
Ukadike shed light on the role of the Nigerian National Petroleum Company Limited (NNPC), indicating that price changes at NNPC outlets often serve as a precursor to adjustments across other marketer outlets. This pattern highlights NNPC’s role as a primary distributor of petroleum products in the current landscape.
Forex Constraints and the Way Forward
Clement Isong, the Executive Secretary of the Major Oil Marketers Association of Nigeria, pointed out the dilemma faced by dealers, who, despite being issued licenses for importation, are unable to procure adequate forex from the illiquid I&E window. He noted that the need to address security issues in the Niger Delta remains pivotal to enhancing Nigeria’s daily crude oil output, thereby ensuring a more robust forex market.
Government’s Pledge to Intervene
Isong alluded to President’s commitment to intervene if petrol prices rise significantly. This commitment underscores the government’s recognition of the potential negative impact of soaring prices on the populace and its resolve to mitigate such a scenario.