Oil market experts have insisted that if the exchange rate between the dollar and the Nigerian Naira remains within the range of N910 to N950 on the parallel market, the price of fuel could surge from N680 per litre to N720 per litre in the coming weeks.
They further revealed that importers looking to bring in petrol are facing challenges due to the limited availability of foreign currency to facilitate the importation.
This concern was raised on Sunday, August 13, merely a week after the local currency breached the N900 per dollar mark, with the Naira being exchanged for over 945 per dollar on the parallel market by Friday.
Oil dealers highlighted that the official foreign exchange window for importers and exporters provided by the Central Bank of Nigeria (CBN), which presents a more favorable exchange rate of around $740 per liter, remains constrained and is unable to offer the necessary $25 million to $30 million required for petrol importation. As a result, they disclosed that petrol import activities have been suspended by dealers who were initially enthusiastic about bringing in the commodity. Several senior officials from prominent oil dealerships warned that an increase in the price of petrol is likely unless the local currency appreciates in the coming weeks.
Representatives of prominent associations in the oil industry, including the Major Oil Marketers Association of Nigeria, Independent Petroleum Marketers Association of Nigeria, and Petroleum Products Retail Outlets Owners Association of Nigeria, emphasized the need for the Federal Government to intervene in order to address this crisis.
Chinedu Ukadike, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, elaborated in an interview with Punch that the price of petrol is now closely tied to fluctuations in the foreign exchange market, and therefore Nigerians should anticipate an impending price hike.
Responding to inquiries about potential petrol price increases, he stated, “Once there is slack in the naira against the dollar, there is going to be an effect. The demand and supply of forex is a key factor. We should also understand that it is not only petroleum products that use forex.
“Other manufacturers who import one thing or the other are also searching for dollars. So, the surge for dollars has continued to increase. So now that the dollar is hitting N910 to N940, and approaching N1,000, you should expect to buy PMS at the rate of N750/litre. It is simple mathematics, once the dollar is going up, have it in mind that the prices of petroleum products would definitely increase because the products are dollar-driven.”
Ukadike emphasized that oil dealers are still obtaining dollars from the parallel market due to the inadequate liquidity of the CBN’s official Importers and Exporters window.
“Nigerians should brace for a price regime of between N680 to N720 if the exchange rate stays around N910 to N950/$, but the price is going to hit N750 once the dollar rises to N1,000.
“This is because marketers still source dollars from the parallel market, and not only marketers but virtually all importers in Nigeria. There is no subsidy anymore on petroleum products, so you expect the cost to fluctuate with the dollars.” he clarified.