In a surprising turn of events, the Nigerian National Petroleum Corporation Limited (NNPC) is reportedly working on a plan to reduce the price of Premium Motor Spirit (PMS), commonly known as petrol, to N600 per litre, despite surging global crude oil prices. According to recent data, the international benchmark for crude oil prices, Brent crude, crossed $90 per barrel, the highest level since November 16, 2022, which should logically lead to a higher pump price for fuel.
President Bola Tinubu had earlier declared the end of fuel subsidies, allowing market forces to dictate pump prices during his inaugural speech. However, in response to rising crude prices, the government promised there would be no increase in fuel prices.
Currently, petrol is being sold in Nigeria for an average price of between N580 and N640 per litre, significantly lower than neighboring countries such as Cameroon, Benin, Sierra Leone, Togo, Ghana, and Guinea, where the prices range from N1,008.90 to N1,258.20 per litre. This price discrepancy has raised questions about whether the fuel subsidy has been quietly reinstated.
Insiders in the fuel industry have revealed that NNPC may be unofficially subsidizing PMS through favorable exchange rates, as they have access to dollars from crude oil sales. This approach allows NNPC to maintain the lower price, while other marketers have to source foreign exchange on their own, impacting the prices they can offer to consumers.
Economists like Tunji Adeboye have expressed concerns about the lack of transparency in the pricing of petrol, especially in the face of increased landing costs for imported products. Adeboye called on the federal government to provide a clear pricing template to justify the current pump price.
In a related development, NNPC Limited has secured a $3 billion loan from AfreximBank, aimed at strengthening the Nigerian Naira against the dollar and ultimately reducing the cost of petrol in the country. This loan is structured as an upfront cash loan against future crude oil production proceeds.
As NNPC works on this plan to potentially reduce the fuel price to N600 per litre, it remains to be seen how this move will impact consumers and the Nigerian economy amid ongoing fluctuations in global crude oil prices.
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