The pump prices of Premium Motor Spirit (petrol) may rise further in the coming days as the landing cost of imported PMS has increased again, amid the recent rise in the importation of the commodity, The PUNCH reports.
The surge in imported petrol is coming amid the Dangote refinery’s suspension of the sale of petroleum products in naira to local marketers following the Federal Government’s alleged refusal to continue the naira-for-crude deal.
On Tuesday, The PUNCH reported that the meeting that was earlier scheduled on Monday between the Technical Sub-Committee on the Naira-for-Crude Policy, Dangote refinery, and other government officials did not hold as planned
Insiders familiar with the workings of the committee said the meeting was rescheduled and may be held before the Sallah break.
A source close to the committee revealed that the meeting didn’t hold because the Nigerian Upstream Petroleum Regulatory Commission had yet to present possible options on the naira-for-crude deal, as required by the committee.
Data obtained by the Major Energies Marketers Association of Nigeria on Wednesday indicated that the landing cost of a litre of imported petrol increased by N88 in one week, a development that should reflect on the pump prices of the commodity in the coming days.
But stakeholders under the aegis of MEMAN said those accustomed to price control in the past are resistant to the current changes in the downstream sector, saying price changes are inevitable in a deregulated market.
The PUNCH reports that the landing rose from N797 per litre last week, hitting N885 per litre this week. This is an increase of N88 for each litre of petrol imported into the country.
The Major Energies Marketers Association of Nigeria confirmed the rise in the landing cost in its daily energy bulletin released on Wednesday.
Our correspondent reports that the new landing cost is N25 higher than the N860 that end-user customers pay for Dangote petrol from MRS and other partners. Similarly, the Dangote refinery’s ex-depot petrol price is N815 per litre, N70 lower than the new landing cost.
There are indications that this imported petrol may hit N1,000 per litre at filling stations after adding charges and the margins.
In the past few weeks, the pump price of petrol fell to an average of N860 per litre from about N1,000 in January. The Dangote refinery crashed the price multiple times, creating what many described as a trade war in the market.
Fuel importers lost billions of naira as they were made to sell petrol below their costs. During this period, the landing cost fell from about N927 below Dangote’s ex-depot price, forcing the refinery to react with a price cut.
However, with the impasse between the Dangote refinery and the Nigerian National Petroleum Company Limited over the naira-for-crude deal and the rise in the landing cost, there are fears that the price of PMS will rise.
Many have said that the naira-for-crude deal is the only reason the Dangote refinery lowered petrol prices repeatedly.
Experts have suggested that if the 650,000 refinery does not get crude in naira and sell refined products to the local market in naira, it will no longer be able to cut prices. With this, the cost of imported fuel may keep rising, especially due to foreign exchange instability.
While announcing the suspension of naira fuel sales last week, the Dangote Group said, “Dear valued customers, we wish to inform you that the Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira. This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in US dollars.
“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency.”
Immediately after the announcement, the cost of loading petrol at private depots in Lagos jumped to about N900/litre. It was less than N850/litre before the announcement.
Fuel imports rise
The PUNCH recently reported that seven vessels carrying imported Premium Motor Spirit were expected to berth at seaports along the nation’s borders between March 17 and 23.
According to a document obtained from the Nigerian Port Authority, these vessels carrying 115,000 metric tonnes, representing 154.22 million litres of PMS were to bring in products through three seaports to improve fuel supply nationwide.
An analysis of the document from NPA showed that the commodities landed at the Tincan port in Lagos, the Lekki Deep Seaport in Lagos, and the Calabar port in Cross River State.
The document also revealed that the Dangote refinery imported 654,766 metric tonnes of crude oil within the same period.
Meanwhile, to avoid a return to the days of fuel scarcity, owners of filling stations and many Nigerians appealed to the Federal Government to consider renewing the naira deal with Dangote refinery.
However, depot owners, who are mostly affected by Dangote refinery’s repeated price reduction, told the Federal Government not to renew the naira-for-crude deal, underscoring the effect of the company’s price crashes on its rivals.
The Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria, Olufemi Adewole, said, “The naira-for-crude oil transaction framework presents significant risks that could affect Nigeria’s foreign exchange stability and deter foreign direct investment.”
In a statement, Adewole highlighted concerns over the volatility of the naira, emphasising that crude oil transactions are traditionally carried out in US dollars due to its stability and global acceptability.
