The rise in crude oil prices and the depreciation of the Nigerian Naira against the US dollar may lead to an increase in the pump price of Premium Motor Spirit (PMS), commonly known as petrol, according to oil marketers.
The recent surge in global crude oil prices, reaching approximately $94 per barrel, and ongoing foreign exchange challenges are impacting the cost of fuel in Nigeria.
Dealers in the downstream oil sector explained that crude oil and the exchange rate accounted for over 80% of PMS costs. They suggested that if the government maintains the current petrol price of N617 per litre, it implies that a form of subsidy on PMS has quietly returned.
Oil marketers argue that this quasi-subsidy, driven by the rising price of crude oil, is necessary to bridge the gap between the official and parallel exchange rates.
They noted that while Nigeria benefits from higher earnings from crude oil sales due to the price increase, these earnings are used to import refined petroleum products. This situation has raised concerns about the sustainability of fuel prices in the country and the need for more transparency in government fuel pricing policies.
The Nigerian Association of Road Transport Owners (NARTO) also expressed concerns about the price cap on petrol, which makes it challenging for transporters to adjust their fares in line with rising operational costs. NARTO emphasized that the government should consider adjusting the pump price of PMS to address the challenges faced by transporters, particularly the high cost of diesel.
The Government had previously indicated that fuel subsidies had been removed, but these recent developments suggest that a form of quasi-subsidy may be in place due to the fluctuating price of crude oil and the impact on Nigeria’s foreign exchange earnings.