The Nigerian National Petroleum Company Limited (NNPCL) has increased the pump price of Premium Motor Spirit (PMS) popularly known as petrol to N617 per litre at outlets in Abuja.
The fresh hike in the price of fuel was announced on Tuesday barely two months that President Bola Tinubu announced the removal of subsidy.
Meanwhile, in Lagos, the outlets are selling between N560 to about N617, according to a survey conducted by Vanguard.
As Nigerians groan over the new fuel price regime, the National Operations Controller of the Independent Marketers Association of Nigeria (IPMAN), Mr Mike Osatuyi gave reasons for the hike.
Here are the reasons:
Increase in crude oil prices in the international market
Brent crude benchmark price had surpassed $80 per barrel for the first time since May 2023. This is a sign that supply is gradually tightening and demand is expanding.
This happened after Saudi Arabia agreed to cut its output to firm up oil prices, reflecting in 1 million barrels reduction per day from June.
Increase in the Dollar to Naira exchange
Another factor that led to the increase in fuel price was the hike in the exchange rate between the naira and the US dollar closed at N795.28/$1 at the official Investor and Exporters window.
This was established after the order by the President that there should be a unified exchange rate. On Monday, 17th July 2023, it traded N820/$1 at the unofficial I&E Window.
Petroleum is imported with foreign currency
The imports by many companies have not arrived in the country as they need more naira to put into dollars in order to import.
With the dwindling power of the naira, currently going for more than N800 to a dollar, they need more naira to put into dollars in order to import. Naira is becoming cheaper than before.
Will the price fall in the future?
As debates go on whether the prices of fuel will drop, it should be noted that this will depend on market forces.
It is expected that the price will drop based on the competition increased supply will eventually impact the domestic market later.
Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL) said that fuel pump prices in the country, are reflective of the current market price of the commodity.