Abuja, 29th October, 2023 – Petroleum product marketers in Nigeria have recently raised concerns that the price of petrol at the pump in the country could surge further, potentially reaching a staggering range of N700 to N800 per litre. This disconcerting prediction comes as a response to the current pump price, which falls within the range of N580 to N617 per litre.
The apprehensions were expressed during the Oil Trading and Logistics (OTL) Africa Downstream Expo, a significant industry event held in Lagos. Oil marketers conveyed their frustration over the reimplementation of a regulated petrol pricing system. This move was prompted by escalating landing costs and a scarcity of foreign exchange.
In a panel discussion titled “Africa Fuels Update – Overview of Trends and Market Development,” Mrs. Adenike Labanjo, the Chief Operating Officer of Pinnacle Oil and Gas Limited, sounded the alarm regarding the looming price hike. She directed a question to Mr. Adedapo Segun, the Executive Vice President (Downstream) of the Nigerian National Petroleum Company Limited (NNPC), saying, “Now, with the widening gap between the NNPC costs and imports, which could land close to N700 to N800, how do we ensure that the illegal export of petrol does not come back? Because the gaps seem to be widening by the day with the various activities going on all over the world.”
Mrs. Labanjo emphasized that the rising cost of procuring petrol had become a more pressing challenge for the marketers than for the NNPC. She attributed this to an imbalance in foreign exchange accessibility that favors the national oil company over private marketers. She also pointed out the volatile nature of foreign exchange rates as a hindrance that hindered some marketers from locking in their cargoes at an advantageous time.
The foreign exchange issue has led to significant setbacks in the importation of petrol, with many players finding themselves unable to import the product even with the necessary approvals from government regulatory bodies.
Dr. Mohammed Salaudeen, the Executive Director of Northwest Petroleum and Gas Company Limited, revealed that the exorbitant cost of sourcing petrol has caused the closure of about 90% of petrol depots across Nigeria. He lamented that the cost of purchasing 10,000 metric tonnes of petrol locally from the NNPC and other sources had surged to N7 billion, up from a considerably lower figure the previous year.
Mr. Jude Nwaulune, the Managing Director of Rainoil Logistics, pointed out that the cost of landing petrol in Lagos had reached approximately N560 to N565 per litre. Additionally, the cost of transportation from Lagos to their depot in Oghara, Delta State, amounted to around N570 per litre. For deliveries to Calabar, Cross River State, the cost was approximately N580 per litre. This challenging situation was attributed to foreign exchange issues, the expense of local distribution to pumps, and the escalating cost of diesel, which is essential to power their trucks.
The prospective increase in petrol prices, combined with the escalating costs throughout the supply chain, has placed immense pressure on independent marketers. The economic landscape for these marketers has undergone a significant transformation since the deregulation of petrol prices, making the business less sustainable and more uncertain.
In response to concerns about the perceived FX imbalance and the competitive advantage held by the NNPC over private marketers, Mr. Segun, the Executive Vice President of Downstream at NNPC Limited, emphasized that the national oil company operates as a private integrated entity with a natural edge over its competitors. He underscored the need for other marketers to adapt and compete effectively in light of the NNPC’s competitive advantage.
Under the new regulatory framework established by the Petroleum Industry Act (PIA), NNPC Limited continues to serve as a key player, tasked with guaranteeing energy security for Nigeria. Mr. Segun reiterated the company’s commitment to fulfilling this role.
As Nigeria grapples with these challenges in the petroleum industry, there is growing concern among both industry experts and the public regarding the potential impact on the cost of living and the overall economy. It remains to be seen how the government and industry stakeholders will navigate these complex issues to ensure a stable and affordable energy supply for the country.