Nigeria is facing new challenges on the energy front as the price of crude oil continues to climb. With crude oil hitting $95.70 per barrel, up from $94 per barrel, the global market is experiencing turbulence. This development has significant implications for the price of imported fuel in Nigeria, where inflation and the depreciation of the Naira are already causing concerns.
Crude Oil’s Ascension:
Recent data from the Organisation of Petroleum Exporting Countries (OPEC) reveals that the OPEC Basket, consisting of various oil grades from member countries, is now valued at $95.70 per barrel. This uptick in crude oil prices has set off alarm bells, especially for nations like Nigeria, which relies heavily on fuel imports.
Oil traders predict that the escalating cost of oil will inevitably be passed on to fuel importers in countries like Nigeria. With Nigeria importing all its petrol from the global market, the impact of this rise in oil prices is keenly felt. However, this passing of costs is further complicated by the Naira’s depreciation.
The Naira’s exchange rate, currently at N950 per United States dollar, has been under pressure due to a shortage of foreign currency. This means that to secure new fuel imports, more Naira will be required, adding to the economic challenges facing Nigeria.
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Fuel Subsidy and Market Instability:
Fuel subsidy, which the Nigerian government has been grappling with, has also seen an increase, further complicating the fuel market’s stability. These factors collectively hinder oil marketers’ ability to import petroleum products even after the market’s deregulation.
Back in August 2023, it was reported that the landing cost of petrol had risen to N600 per litre, driven by the increase in crude oil prices, Naira depreciation, and inflation. This cost excludes additional expenses like depot charges, transportation, and marketers’ margins, which collectively raise the price at filling stations to over N700 per litre.
High crude oil prices and the Naira’s persistent depreciation are challenging the effectiveness of deregulation in Nigeria’s fuel market. While the Nigerian National Petroleum Corporation (NNPC) and major marketers continue to sell petrol at N568 per litre, independent retailers are pricing it higher, varying from N570 to N700 per litre depending on location.
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