Fuel Prices Set to Soar as Crude Oil Hits $95.70 per Barrel, Straining Nigeria’s Economy

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Fuel Prices Set to Soar as Crude Oil Hits $95.70 per Barrel, Straining Nigeria's Economy

The relentless surge in crude oil prices has reached a new high, with the cost per barrel climbing to $95.70 on Monday, up from $94 over the weekend. This uptick, coupled with persistent inflation and the devaluation of the Naira, is sending shockwaves through global fuel markets, resulting in an impending increase in the price of imported fuel.

According to the latest report from the Organisation of Petroleum Exporting Countries (OPEC), the OPEC Basket, consisting of a blend of oils from various member countries, including Nigeria, Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Saudi Arabia, the UAE, and Venezuela, has seen its price rise to $95.70 per barrel, marking a noticeable uptick from $94 per barrel the previous day.

Oil traders, in discussions with Vanguard, have noted that refiners are likely to pass on the elevated oil prices to fuel importers, including Nigeria, a country that relies entirely on global markets for its petrol supply. However, this hike in import costs will necessitate more Naira, which is currently trading at N950 per United States dollar. The ongoing shortage of the dollar is significantly impacting Nigeria’s economy.

The National Operations Controller of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Mike Osatuyi, could not be reached for comments on this matter. Nevertheless, a credible source within the industry, who chose to remain anonymous, emphasized the escalating challenges faced by the market.

“The price of crude oil continues to surge in the international market. With the exchange rate at N950 per dollar, foreign exchange has become a major issue that could drive the landing cost to over N600 per litre, up from the previous over N500 per litre. Additionally, fuel subsidies have surged to over N160 per litre, up from the previous N150 per litre. The market is plagued by instability, which is why oil marketers have been unable to import the product for several months after the market was deregulated,” the source explained.

In August 2023, Vanguard reported a 7.5 percent increase in crude oil prices, reaching $85.89 per barrel in August, up from $79.92 per barrel in July. This, combined with the Naira’s depreciation to N775 per dollar in the official market and a soaring inflation rate of 22.79 percent, led to a surge in the landing cost of petrol to N600 per litre in the domestic market.

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It’s important to note that this landing cost doesn’t encompass additional expenses such as depot-related charges, transportation, and marketers’ margins, which collectively push the final retail price at filling stations to more than N700 per litre.

Insiders within the oil marketing sector had previously cautioned that the landing cost for September 2023 was expected to rise even further, as the factors contributing to the August surge remained unabated.

In response to inquiries from Vanguard, Funmi Bashorun, Business Development Manager for West Africa, acknowledged the adverse impact of high crude prices and the continuous devaluation of the Naira on the effectiveness of market deregulation and the participation of more marketers.

While NNPC Limited and major marketers continue to sell petrol at N568 per litre, independent retailers are charging higher prices, ranging between N570 and N700 per litre in different parts of the nation, depending on location.

The situation remains precarious, as Nigeria grapples with the intertwined challenges of surging crude oil prices, a weakened currency, and inflation, all of which are exerting tremendous pressure on the nation’s fuel prices and economy.

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