June 21, 2024/CSL Research
Recently, the Nigerian Bureau of Statistics (NBS) released the price watch reports for Premium Motor Spirit (Petrol) and Automotive Gas Oil (Diesel) for the month of May 2024.
The Automotive Gas Oil price watch report for May 2024 showed that the average price of diesel was up by 66.29% y/y to N1,403.96/litre in May 2024 from N844.28/litre in May 2023.
On a month-on-month (m/m) basis, the average price of diesel was down by 0.78% m/m (N11.10/litre less) from N1,415.06/litre in April 2024. The report highlighted regional price variations, with the South-West region recording the lowest average price of diesel at N1,303.60 per litre in May 2024.
Conversely, the North-East region experienced the highest average price for diesel at N1,605.91 per litre. Limited storage capacity for refined petroleum products and inadequate transportation infrastructure impact the prices of these products causing regional price disparities.
The NBS reported in its Premium Motor Spirit (PMS) price watch report for May 2024 that the average price of petrol was N769.62/litre which reflects a significant growth of 223.21% y/y from the average price of N238.11/litre in May 2023 while also going up by 9.75% m/m from N701.24/litre in April 2024.
The substantial y/y price growth primarily reflects the impact of deregulation, while recent devaluation effects seem minimal due to the subtle reintroduction of subsidies. Nigerian Minister of Finance and Coordinating Minister of the Economy, Wale Edun, confirmed that the fuel subsidy is projected to reach N5.4 trillion this year, officially acknowledging the federal government’s reintroduction of the controversial subsidy.
Regionally, the North-West recorded the highest average price of petrol at N845.26 per litre in May 2024, whereas the North-Central region saw the lowest average price at N695.04 per litre.
The devaluation of the Naira against foreign currencies has negatively impacted the price levels of various commodities. However, the relative stability in the price of Premium Motor Spirit (PMS) despite recent significant devaluation is attributed to the introduction of subsidies. In contrast, the devaluation-driven surge in diesel prices has put pressure on the Dangote refinery to help mitigate rising fuel costs.
In April, Dangote Group’s executive, Devakumar Edwin, confirmed the shipment of diesel and jet fuel into the local market. On 16 April, Dangote refinery announced a reduction in the price of Automotive Gas Oil (AGO), also known as diesel, to N1,000 per litre.
According to a report by S&P Global, the production of high-sulphur diesel from the Dangote refinery prompted the decision to reduce domestic prices. Low-sulphur diesel, which contains less than 500 ppm of sulfur, is considered cleaner for the environment, while high-sulphur diesel is typically used for off-road purposes because it can cause progressive damage to machinery engines.
