Petrol prices soar 43% as subsidy removal nears

Data obtained from the National Bureau of Statistics (NBS) shows that the average price per litre increased from N185.30 to N264.29 last month. On a month-on-month basis, it increased by 0.20 percent from N263.76 in February this year.

Billy Gillis-Harry, president of the Petroleum Retail Outlet Owners Association of Nigeria, told BusinessDay through a phone call that the persistent increase in petrol prices is due to foreign exchange challenges.

“We are converting a dollar-cost product to a local expense in naira. This is the major reason for the continuous increase in petrol prices. As long as the dollar exchange rate is fluctuating, and we do not have access to the official dollar from the Central Bank of Nigeria (CBN) to import, petrol prices will be impacted.

At the current petrol pricing template, the pump price of the product would hover around N385 per litre in Lagos (using the official exchange rate of N461 per dollar), while it could sell for as much as N590 in Lagos (using the black-market rates of N750/$1), an analysis of the template and a survey of petroleum marketers’ data show.

The pump price of petrol could, however, move between N390 and N400 per litre when it is moved across Nigeria at the official rate. At the black-market rate, it could top N600 per litre, based on how much the government pays as bridging claims to maintain near-uniform pricing across Nigeria.

Gillis-Harry said that removing subsidies is critical because the size of the money is needed for other sectors to grow the economy. According to him, competition will reduce the product’s price when the subsidy is removed.

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“Petrol subsidy removal will impact Nigerians, but before it is removed, some of the infrastructure, like one, two, or three of the refineries, should start functioning, so we are not totally import dependent,” he said.

“Once we are import dependent and we will still be dollarizing our PMS supply, the dollar price will impact the price of petrol at any time. But if we produce locally, most dollar components will be removed, driving down prices.”

The major components that constitute petrol landing costs in Nigeria include product cost, traders’ and insurance margins, shipping, charges by government agencies, financing and banking charges, and storage charges.

Two weeks ago, oil marketers urged the federal government over their proposal to build about 30,000 gas stations to cushion the effects of the proposed subsidy removal on petrol. They asked the FG to make the CBN release the N250 billion intervention fund for the National Gas Expansion Programme as loans to vehicle owners to acquire gas conversion kits.

The federal government of Nigeria has also secured an $800 million grant from the World Bank, as part of its subsidy palliative measures to cushion the effects of subsidy removal in June 2023.

BusinessDay’s investigations further show that some Nigerians are still struggling to keep up with the rising cost of petrol.

“The increase in petrol prices has increased transport fares in my area and the cost to get the product. Mid-last year, I used to spend N200 for transport plus N5000 to fill my 25-litre jerry can. However, I now spend N400 for transport and N6500,” said Michael Ogbonna, a panel beater in Stepping Stone, Satellite Town, Lagos.

According to NBS, Imo State had the highest average retail price for petrol with N332.67, followed by Taraba with N330.00 and Borno with N324.55. On the other hand, Benue recorded the lowest average retail price for petrol at N195, followed by Plateau at N196.79 and Nasarawa at N197.50.

Analysis by zone showed that the South-East recorded the highest average retail price in March 2023 with N306, while the North-Central had the lowest with N205.10.