February 22, 2023/CSL Research
Nigerians are still paying far above N185 per litre approved pump price for petrol amidst a lingering fuel scarcity. This is according to a report by the Nigerian Bureau of Statistics (NBS). The figures released showed that members of the Major Oil Marketers Association of Nigeria, and NNPCL retail outlets sold the product at N185/litre to consumers, while members of the Independent Petroleum Marketers Association of Nigeria on the other hand, sold PMS between N200 and N250/ litre. It was noted in the report that average retail price paid by consumers for Premium Motor Spirit (Petrol) for January 2023 was N257.12, indicating a 54.52% increase relative to the value recorded in January 2022 (N166.40). Likewise, comparing the average price value with the previous month (i.e. December 2022), the average retail price increased by 24.70 percent from N206.19.
In January, the country experienced long queues in major cities especially Lagos and abuja, despite NNPC’s assurance of adequate supply. Nigerians have had a hard time getting petroleum products at filling stations. The scarcity of the product has led some independent marketers to increase their pump price to range between N200 and N300 per litre. The disparity in pump prices has persisted despite the government’s repeated claims that a price increase has not been approved. The federal government has consistently reiterated that it had not sanctioned an increase in the pump prices of petrol across the country. The Major Oil Marketers Association of Nigeria (MOMAN) attributed the lingering fuel scarcity and the increase in petrol pump prices in the country to high costs of vessels and inadequate trucks to deliver petroleum products from depots to filling stations across Nigeria.
The commencement of Dangote refinery is expected to boost crude oil production capacity which in turn will end the incessant fuel scarcity. Nigeria’s hope of attaining self-sufficiency in the domestic oil refining space rests largely on the operations of Dangote refinery which has one of the largest production capacities in the world. The refinery, operating at full capacity would more than meet Nigeria’s domestic fuel requirements (estimated at 66.8m liters a day according to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA)) with excess capacity for exports.
We do not expect a respite in petrol pump price as local refining is only expected to save freight cost implying subsidies will still be required if current realities remain the same. According to the last PMS pricing template released by the NMPDRA early 2021, freight cost was estimated at N6.51/litre, 3.4% of the then landing cost of N189.61/L. Other factors like the international market price of crude oil, marketer’s margin etc are expected to continue to contribute to the total cost of petroleum products.
