Naira crumbles to 920/$, fuel marketers push for fresh price hike
Oil marketers, on Thursday, insisted on a possible hike in the pump price of Premium Motor Spirit, popularly called petrol, following a further plunge in the value of the naira against the United States dollar.
The local currency weakened against the greenback at the black market from 900/dollar on Wednesday to 920/dollar on Thursday, raising further concerns about whether the pump price of petrol could be sold at the current price.
The naira which had hit 945/dollar at the parallel market about two weeks ago, rebounded last week.
However, the local currency began a move southward this week, a situation that has unsettled economic managers and stakeholders in the oil and gas sector.
Oil dealers and marketers told The PUNCH on Thursday that with the exchange rate at N920/$, the pump price of petrol could not remain at N617/litre, particularly if the current exchange rate lingered.
They again projected a cost of between N680/litre to N700/litre for PMS, based on an exchange rate of N920/litre, stressing that the forex rate was about N750/$ to N800/$ at the time the cost of petrol was pegged at N590/litre to N617/litre.
The oil marketers, however, pointed out that since the Federal Government had insisted that it would not increase the petrol price, it must then be “subsidising the commodity secretly, based on the prevalent exchange rate reality.”
Going by the projections and analysis of oil marketers and dealers, it, therefore, implies that the Federal Government might probably be spending about N90 as subsidy on petrol due to the crash of the local currency against the dollar.
It was gathered that the ex-depot price of petrol was around N585/litre on Thursday. The projected cost of N680/litre, going by the current forex rate, means that the government might be forced to spend about N95/litre as subsidy.
Last week, the Nigerian Midstream and Downstream Petroleum Regulatory Authority stated that petrol consumption in Nigeria was about 52 million litres daily.
When this is multiplied by the estimated N95/litre projected subsidy and calculated for a month, it implies that the government could be forced to spend about N153bn as fuel subsidy monthly.
The Special Adviser to the President on Media and Publicity, Ajuri Ngelale, had told State House correspondents last week that President Bola Tinubu had instructed that the cost of petrol should not increase.
“Mr President wishes to assure Nigerians following the announcement by the NNPC Limited just yesterday (Monday) that there will be no increase in the pump price of PMS anywhere in the country. We repeat, the President affirms that there will be no increase in the pump price of PMS,” he said
NNPCL had also last week, spoken up as regards the widespread concern of a possible hike in the pump price of petrol.
“Dear esteemed customers, we at NNPC Retail value your patronage, and we do not have the intention to increase our PMS pump prices as widely speculated. Please buy the best quality products at the most affordable prices at our NNPC Retail stations nationwide,” the company stated.
NNPC Retail is the downstream subsidiary of NNPCL that retails refined petroleum products for the group.
IPMAN warns
Recall that oil marketers had also indicated last week that the cost of petrol would rise to between N680/litre and N720/litre in the coming weeks should the spike in the exchange rate persist.
They again insisted, on Thursday, that since the fall in the naira exchange rate failed to abate the last few days, the cost of petrol would likely rise regardless of the positions of NNPCL and the Presidency, stressing that the only remedy was if the government had returned fuel subsidy quietly.
“I still maintain that since we are still importing petroleum products into this country, it has to do with forex. And once it has to do with forex, it means that so much naira will be chasing a few dollars.
“And since we don’t have the influx of dollars into Nigeria, the after effect is that the landing cost of petrol will continue to increase as long as the dollar continues to rise,” the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Chinedu Ukadike, stated.
He added, “The rise in dollar automatically leads to an increase in the cost of petroleum products, except the NNPCL is subsidising it through the Federal Government. I also recall the last statement by the Special Adviser to the President on Media, who said he got a brief from the president that the fuel price would not rise.
“That automatically means that there is quasi-deregulation and that Mr President is cushioning the price of petroleum products in relation to the dollar. So if the dollar is higher at the parallel market, it means that whatever is the offshoot, the Federal Government will continue to keep petrol prices within a price regime.
“And that regime currently is from N590/litre to N620/litre depending on the part of Nigeria you are buying it from. But if you allow the commodity to sell at the free market price, with respect to the hike in dollar currently, the cost of petrol should be around N680/litre and N700/litre.”
Also speaking on the issue, the Secretary, IPMAN, Abuja-Suleja, Mohammed Shuaibu, noted that the petroleum products market today is largely determined by forex.
“Of course, there was panic when the dollar was almost hitting N1,000, which is why the government is supposed to act quickly to avoid a crisis. They (the government) debunked projections of fuel price hikes.
“But the truth is that as it is now, no indigenous marketer is going to bring in this product any longer because of the rate of the dollar. The petrol being consumed now is from the reserve, but we don’t know what the government’s plan is. I don’t know if there is any ship that is bringing in products now.
“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.”