March 22, 2023/CSL Research
Despite the ease in fuel scarcity witnessed in February, consumers still paid more than the official pump price of N185/litre. According to a report by the Nigerian Bureau of Statistics (NBS), consumers paid an average of N263.76/litre, indicating a 54.76% increase when compared to the value recorded in February 2022 (N170.42). Likewise, comparing the average price with the previous month (i.e. January 2023), the average retail price increased
by 2.58% from N257.12/litre. The report also highlighted that Jigawa state paid the highest retail price of N329.17/litre for Premium Motor Spirit (Petrol) , followed by Rivers and Ebonyi with N323.33 and N317.14, respectively while Niger State paid the lowest retail price of N198.50, followed by Plateau (N198.71) and Abuja (N200.00). In addition, analysis by zone showed that the South-East had the highest average retail price of N306.86 in February 2023
while the North-Central had the lowest price of N215.01/litre.
The prices of retail petrol continue to increase month on month and this can be attributed to a shortage of supply of the product. Oil marketers had demanded an increase in the volume of PMS released to independent filling stations, so as to curb the widening disparity in the cost of petrol and the Federal Government, through its Nigerian National Petroleum Company Limited, had increased the supply of Premium Motor Spirit (PMS) to independent but prices have continued to increase.
In our view, Nigeria’s local refining capacity can get a boost from the start of the Dangote refinery and end the problem of supply shortage. The proposed commencement of the refinery with a refining capacity of 650,000bpd of petrochemicals is expected to end the incessant fuel scarcity. At full capacity the refinery should be able to meet Nigeria’s domestic fuel requirements and trigger a positive ripple effect across other sectors of the economy. Despite the excitement that comes with the commencement of the Dangote refinery, we expect a gradual impact on the economy given that it could take up to 12 months for the refinery to be fully operational.
We do not expect the commencement of the Dangote refinery to have a significant impact on the petrol pump price given that factors like the international market price of crude oil will continue to pressure the cost of PMS. Another factor that contributes to the increase in retail pump price is the cost of transportation, especially inter-state transport. The cost that comes
from moving PMS from the depot to filling stations is passed down to the final consumers increasing PMS prices. Despite the official pump price of N185/litre, marketers have constantly ignored the government’s official price and continue to adjust their own prices.
Also, we expect the proposed removal of fuel subsidy to significantly impact the cost of retail PMS in the long run.
