NNPC cites market forces, IPMAN fingers forex market convergence
By Jeph Ajobaju, Chief Copy Editor
Market forces have been cited by Nigerian National Petroleum Company (NNPC) Group Executive Officer Mele Kyari for the new hike in fuel pump price now set at N617 per litre but in reality up to N700 in some parts of the country.
Independent Petroleum Marketers Association of Nigeria (IPMAN) National President Chinedu Okoronkwo blamed the rice on the volatile foreign exchange (forex) where the dollar continuously soars far above the naira.
“This business is done with dollars, remember the rate of dollars now is in one window and not like we had several others, where CBN [Central Bank of Nigeria] will give around N400 while the black market will be around the region of N700 but now there is no more second window,” he explained on Arise News as reported by Daily Post.
“Today the dollar is around N800 and in a deregulated regime, what determines the price of anything is the cost. The product is not refined here, everything is imported.
“If we want to achieve something, there are other alternatives we have proffered. The CNG [compressed natural gas] is something this nation needs to seriously look into; so it would be a matter of choice if you want to use gas or petrol.
“The price has really gone up because of the fundamentals in the market which has to do with the dollars.”
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Summary of reasons for the increase in pump price
The new fuel price was announced on Tuesday, the second rise since President Bola Tinubu announced the removal of subsidy on May 29.
Fuel now costs N617 per litre in Abuja, goes for between N560 and N617 in Lagos, and for as much as N700 in far flung parts of the country, according to a survey by Vanguard.
- Increase in crude oil prices on the international market,
Below are the summary of the major reasons for the price rise:
- Brent crude benchmark price has surpassed $80 per barrel for the first time since May 2023, a sign supply is tightening and demand expanding.
- This happened after Saudi Arabia agreed to cut its output to firm up oil prices, reflecting in 1 million barrels reduction per day from June.
- Increase in the dollar to naira exchange,
- The hike in the exchange rate between the naira and the dollar closed at N795.28/$1 at the official Investor and Exporters (I&E) window.
- This was established after the order by Tinubu for a unified exchange rate. On July 17, it traded N820/$1 at the I&E Window.
- Fuel imports by many companies have not arrived in Nigeria as they need more naira to put into dollars in order to fund their consignments.
- With the exchange rate currently going for more than N800 to the dollar, fuel importers need more naira to put into dollars to continue in business.
