Nigerians are being informed to prepare themselves for a forthcoming adjustment in the pricing of Premium Motor Spirit, commonly known as petrol.
The rationale behind this anticipated change is the ongoing foreign exchange crisis, which has led to the Nigerian currency’s significant depreciation against the US dollar.
As of the most recent report, the naira is trading at over 945 naira per dollar on the parallel market, thereby contributing to the potential alteration in petrol pricing.
Factors Driving the Expected Price Increase
Oil marketers have disclosed that the price of petrol could range between 680 naira per litre and 720 naira per litre in the near future if the dollar’s value continues to fluctuate between 910 naira and 950 naira on the parallel market.
One key factor contributing to this situation is the inadequacy of foreign exchange liquidity in the Central Bank of Nigeria’s Importers and Exporters’ official window, which offers a lower exchange rate of about 740 naira per dollar.
This deficiency in liquidity has hindered the availability of the 25 million to 30 million dollars required for the importation of petrol by dealers.
Impact on Petroleum Importation and Market Dynamics
The limited availability of foreign exchange has resulted in the suspension of petrol importation by dealers who were initially inclined to bring in the commodity.
Notably, the case of Emadeb, a company that imported petrol, illustrates the challenge of recouping investments due to the depreciation of the naira.
This circumstance has prompted leaders of major oil marketers’ associations to call upon the federal government to address the forex issues.
Failure to do so could lead to an increase in petrol prices, unless the local currency appreciates in the coming weeks.
Forex Fluctuations and Price Implications
The National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief Chinedu Ukadike, emphasized that the volatility in the foreign exchange market significantly influences the price of petrol.
He explained that fluctuations in the naira-to-dollar exchange rate impact the cost of petroleum products, as the demand for forex extends beyond the oil industry.
Other sectors that rely on imported goods also compete for limited foreign exchange reserves, contributing to the overall rise in demand.
Projected Price Regime
Ukadike projected that if the exchange rate remains within the range of 910 naira to 950 naira per dollar, Nigerians should brace themselves for a new petrol price regime ranging from 680 naira to 720 naira per litre.
However, he warned that should the dollar’s value reach 1,000 naira per dollar, the price could surge to 750 naira per litre.
He attributed this trend to the reliance on the parallel market for sourcing dollars, a practice not limited to petroleum marketers but embraced by various importers in Nigeria.
NNPC’s Role and Future Market Dynamics
Ukadike also highlighted that the Nigerian National Petroleum Company Limited (NNPCL) remains the primary importer of petrol into the country.
While a few independent companies, like Emadeb, have engaged in importation, the depreciation of the naira creates challenges in recovering invested funds since the imports are priced in dollars.
This situation complicates further purchases by independent importers.
In closing, Ukadike noted that changes in petrol prices at NNPC outlets often set the tone for adjustments by other marketers, given NNPC’s substantial role in the distribution of petroleum products.
Conclusion
The convergence of factors such as forex fluctuations, limited foreign exchange liquidity, and reliance on the parallel market for sourcing dollars has paved the way for a potential petrol price increase in Nigeria.
As the naira’s value continues to be influenced by market dynamics, consumers are advised to prepare for potential shifts in petrol pricing in the coming weeks.