How much will fuel cost when subsidies are removed? Oil marketers provide a hint

NEWS DIGEST – The last two weeks saw the unveiling of the naira notes and another episode of fuel scarcity which does not seem to be ending.

Earlier this month, Finance Minister Ahmed Zainab reiterated the government’s intention to discontinue fuel subsidies in June 2023. Since that announcement, experts have attempted to predict how much gasoline will likely sell for post-subsidy.

Gasoline retails for more than N500 per litre in neighboring West African countries such as Ghana. Despite Nigeria’s status as an oil-producing country, citizens expect gasoline prices to skyrocket at a similar rate.

Oil marketers now predict that gasoline will cost more than N450 per litre after the federal government stops paying subsidies in June.

At the moment, oil marketers claim that the ongoing shortage of gasoline in depots across the country is to blame for the intermittent fuel scarcity experienced in recent months.

Not only is it difficult to purchase the product from petrol stations, but it is also difficult to purchase petrol at N250 per litre, which is still N65 more than the previous rate of N185 in several petrol stations.

According to an official of the Independent Petroleum Marketers Association of Nigeria, oil depots sell to marketers at N185 per litre rather than the NNPC-set subsidised rate of N147 per litre.

“All vessels operate on international rates and it must be in forex,” he told Punch Newspapers. “So as it is now, the rates are getting so high for NNPC to bear alone. Some of these charges have to be pushed to depots that are taking the products and they have to pass it on to consumers.

“I know somebody who said he bought from a depot at N182/litre. And he got it at this rate because he did bulk purchase, he bought about 20 trucks.

“And he bought it from one of the major marketing companies. So when you make a bulk purchase at N182/litre, then you can imagine what those who are buying one or two trucks will have to pay for the product.”

Fuel price volatility has raised concerns about how bad things could get in a post-subsidy world.

According to Chinedu Ukadike, IPMAN’s spokesperson, the current landing cost of petrol into Nigeria is N450/litre, but that figure had managed to stay under N200 per litre until last week due to a N18.39 billion daily payment, as Mrs Ahmed stated in her speech two weeks ago.

Ukadike explained that in a post-subsidy world, the least NNPC can sell to depots is at N400 per litre, but there are still doubts that this is feasible due to uncertainty about what the landing cost would be. Marketers looking to profit could then sell at prices north of N450 per litre.

“That is why you see the lapses,” Ukadike gave his reason for the scarcity. “The government is looking for dollars to import this product and pay the contractors importing for NNPC, and it is also trying to subsidise PMS.”

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