Nigeria’s oil marketers have suggested that the pump price of petrol should be in the range of N890 to N900 per litre due to factors such as the depreciation of the naira against the US dollar and the increase in global crude oil prices.

Oil marketers on Thursday, September 21, 2023, argued that the ongoing foreign exchange crisis and the recent surge in crude oil prices have made it unsustainable to keep the petrol price at N617 per litre.

According to the PUNCH, a data from the marketers showed that the Federal Government may spend about N1.68tn as subsidy on Premium Motor Spirit, popularly called petrol, from September to December this yearThe government and the NNPCL have not officially admitted that subsidy on petrol has been reintroduced. President Bola Tinubu had on May 29 announced ended the subsidy regime during his inaugural address.

The government subsidises PMS through the Nigerian National Petroleum Company Limited. NNPCL is the sole importer of PMS. Other marketers stopped PMS imports due to their inability to access foreign exchange.

The removal of subsidy led to an increase in the pump price of petrol from about N198/litre in May to the current rate of N617/litre. But the fall of the naira coupled with the rise in crude oil price have continued to mount pressure on the cost of PMS.

Dealers in the downstream oil sector explained that the cost of crude oil and the exchange rate of the naira-dollar accounted for over 80 per cent of the cost of PMS.

Brent crude, the global benchmark for oil, rose to about $95/barrel on Thursday. It had peaked to $97/barrel the preceding day, which was the highest figure in 2023.

Oil had started the year at about $82/barrel, dipped to $70/barrel in June, but traded above $94/barrel in the past week.

On Thursday the naira continued its downward trend after exchanging to the dollar at 980 on the parallel market on Wednesday. A week earlier, the naira was exchanged to the dollar at 950/$.

However, on the FMDQ at the Investor & Exporter forex window, the naira appreciated slightly after closing at 770.71/$ on Wednesday from 776.76/$ on Tuesday.

The forex crisis and the recent rise in crude price, according to oil marketers, have made it impossible for petrol price to still remain at N617/litre. They insisted the government had quietly reintroduced fuel subsidy.

A media report on Thursday indicated the Federal Government paid N169.4bn subsidy in August, 2023.

Quoting a Federal Account Allocation Committee document, the report said the Nigerian Liquefied Natural Gas paid $275m as dividends to Nigeria via NNPCL.

NNPCL, according to the report, used $220m (N169.4bn at N770/$) out of the $275m to pay for the PMS subsidy in the review month.

“I told you earlier that there is no way that the government will sustain the price of petrol at N617/litre without paying subsidy on it, going by the continued fall of the naira,” the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Chinedu Ukadike, told The PUNCH on Thursday.

He added, “The dollar is almost N990 at the parallel market currently, and you can see the effect of this on the pump price of diesel. Diesel is close to N1,000/litre, so the retail price of PMS should be around N890 to N900/litre.

“Therefore, it is better the government assists the masses by paying subsidy. From our records, in the United States, the super product or petrol is sold around $3.9, which is close to about N3,000/litre.

“The premium product is sold at about $2.89, which is over N2,000/litre. And if you check in other African countries you will find out that the product is being sold at between N1,200 and N1,500. But going by the forex rate in Nigeria, it should be around N900/litre.”

It was gathered that the subsidised ex-depot price of petrol as sold by NNPCL, was between N585 and N600 depending on area of purchase.

By subtracting the ex-depot cost of N600/litre from the projected unsubsidised rate of N890/litre, that the government may have been spending about N290/litre as subsidy currently.