The removal of the peg on the naira thus allowing for a free float will force a review of the assumptions that led to the pump price of petrol at N488 per litre in Lagos, industry operators say.
Nigeria’s state-owned oil company, the Nigerian National Petroleum Company Limited (NNPCL) last month issued price guidance for its over 900 retail petrol stations and other marketers promptly adopted it.
These assumptions would however change as Naira rates converge with the parallel market rate which currently trades above N750/$1.
The eventual exchange rate will determine petrol prices at the pump as Nigeria’s lack of refining capacity means it imports all the petroleum products it uses locally.
At the current petrol pricing template, the pump price of petroleum products will sell above N590 in Lagos. If the rate converges at N750 as some bankers tell BusinessDay, petrol prices will surge leaving the most efficient operator with relatively cheaper prices.
An analysis of the pricing template shows that product cost at N503.91 per litre and other costs including trader’s margin, freight, NPA port charges, NIMASA, financing costs, jetty storage, and wholesale margin bring the landing cost to N565.34. When retailers’ margins, dealers’ margins and transport costs are added, it brings the price in Lagos to N590.34.
The price could average around N600 – N650 when it is transported across Nigeria, calculations show.
Marketers are already scampering to guarantee supply due to lower inventories and NNPC’s insistence that they must take products at the new rate.
Mike Osatuyi, national operations controller, IPMAN, said that an increase in ex-depot prices would eventually force marketers to raise prices.
“If you want to order now for a truck, you will have like N21.8 million, we are going to increase it more than N500 because if I buy at N480/N495, what price will I sell?” he said.
The new foreign exchange policy could force an upward review of these prices.
The NNPC Limited has been directed to end crude swaps and buy refined crude oil products at market rates. This opens the market to other importers but only those with access to foreign exchange would thrive.
Nigerians who are already bearing the toil of increased fuel and food prices may see costs go even higher.
The major components that constitute petrol landing cost in Nigeria include product cost, traders and insurance margin, shipping, charges by government agencies, financing and banking charges and storage charges. Some of these are charged in dollars and some experts are calling for a review to reduce petrol costs.
“We must resist the dollarisation of the Nigerian economy,” human rights lawyer, Femi Falana said during the recent strike action called by labour.
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