Earlier this year, Nigerians began facing a severe fuel crisis as news of the importation of unadulterated petrol. It was later revealed that the supply shortage crisis was due to logistical, fiscal, and structural, constraints associated with the downstream oil and gas sector. Increased shortages enhanced the relevance of the black market and allowed some retailers to sell PMS above the approved price range set by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Due to efforts from the NNPC to resolve the issue, queues have rescinded in recent weeks. In February, fuel pump prices ranged from N165 to N180, as the panic ensured. Extracts from the recently released Feb-22 Premium Motor Spirit (PMS) Watch, the supply pull inflation seen in petrol pump prices have been mildest in Benue (N165.4), Nasarawa (N165.3), Jigawa (N165.0) as opposed to the intensity seen in Kaduna (N189.1), Anambra (N184.1) and Kebbi (N180.0).

We expect the pump price to remain within NMDPRA’s recommended price. However, in reality, if supply-side constraints persist, we could continue to see an uptick in average PMS pump prices in the next quarter. We suspect the recent short-term shortages are also due to the increased cost of crude, which translates into a higher landing cost of oil which was not then transferred to the pump price of PMS due to the ongoing subsidy program. The disruptions caused by the shortages will add to increased month-on-month inflationary pressures as these cost pressures have already trickled down into transportation and logistical costs on the food index.