An analysis of the petrol prices in Africa indicates that at the current rate of N617 per litre, the only difference between petrol prices in Nigeria and its neigbhouring countries is the absence of taxes on the product.

Currently, Nigeria does not charge taxes for petrol. There is no import duty on the product after it is shipped into the country and Value Added Tax is not charged on the commodity when it is sold at the pump.

The price simply represents the landing cost of the product, with the cost of crude oil and exchange rate being the key variables determining price movements. Therefore, to sell at any price lower than currently posted by the Nigerian National Petroleum Company Limited (NNPCL) and other marketers will imply returning to a subsidy regime.

A comparison of the petrol prices across Africa using N772/$1, the exchange rate at the investors and exporters window where dollars are accessed, petrol will sell for N872 in Ghana, N858 in Benin, N925 in Togo and N967 in Cameroon.

This is why oil marketers under the aegis of the Major Oil Marketers Association of Nigeria (MOMAN) restate that the current pump price of petrol accurately reflects current economic realities in a liberalised market.


How NNPCL arrived at N600/litre

On Wednesday, Nigerians groaned across filling stations as NNPCL sold petrol for N565 in Lagos, while some other stations sold higher. Prior to the increase, they sold at N484 to N488. In Lagos, NNPCL sold the product for Read also: Households in pains as petrol prices jump

“The international price of crude oil and the exchange rate constitute the largest components of the cost build-up for Premium Motor Spirit (PMS), accounting for over 80 percent,” Olumide Adeosun, chair of MOMAN told journalists on Wednesday.

“The remaining 20 percent includes statutory dues, distribution costs, and margins,” Adeosun said.

An exclusive petroleum pricing template seen by BusinessDay showed the latest cost of bringing a litre of petrol to Nigeria’s shores based on 38KT vessel, which includes the cost of the product, freight, insurance, govt charges, and storage, stood at N529, using an exchange rate of N825/$.

Once the petrol arrives in Lagos, the price increases to N589 due to additional costs such as depot throughout (N8), local transport (N6), station margins (N20), and Nigerian Midstream and Downstream Petroleum Regulatory Authority (N5).

Adeosun said Nigeria’s move to float the naira was one of the major reasons why petrol prices have risen to over N600 per litre.

“As of today, the liquid exchange rate is close to N825 to the dollar. This devaluation adds N100 to the cost of importing a single litre of PMS into the country. Consequently, an increase in the pump prices of petrol should be expected,” Adeosun said.

BusinessDay had earlier reported that the eventual exchange rate would determine petrol prices at the pump as Nigeria’s lack of refining capacity means it imports all the petroleum products it uses locally.

“Deregulation promises a transparent and level playing field where cost-reflective prices are evident at fuel stations,” Adeosun added.

Adeosun noted that market liberalisation and the commitment to a level playing field should enhance operators’ efficiency, enabling them to offer competitive pricing choices to the public.

“Some operators have successfully imported PMS into the country, marking the first practical step towards a liberalised market. However, the major challenges still lie in accessing foreign exchange for imports and ensuring a level playing field regarding pump prices,” Adeosun said.

He added, “If marketers are undertaking the financial risk of importing petrol, measures must be in place, in line with the Petroleum Industry Act, to ensure that no one player has an unfair advantage.”

To cushion the effects of new economic realities, MOMAN urged the federal government to engage in the timely, transparent, and visible provision of subsidised transportation to cushion the harsh impacts of subsidy removal.

“The gains from subsidy removal should be invested in the promised palliatives, including subsidized transportation, as well as social investment programs for healthcare, education, and infrastructure development (such as roads, railways, and power),” Adeosun said.

The subsidy, introduced in the 1970s, had kept fuel prices cheap for decades but had become increasingly expensive, costing the government $10 billion last year.

“Subsidy” became a national buzzword in 2012 when the then-President Goodluck Jonathan announced its removal. Petrol prices increased from N65 to N140 per litre and triggered almost two weeks of protests, known as ‘Occupy Nigeria’, causing the government to reverse the decision.

Since ending the subsidy this year, 56 private firms have been licensed to import petrol, and 10 of them are due to start deliveries in the third quarter. The NNPCL had previously been the sole importer of petrol using crude swap contracts.

“Out of these 10, three of them have already landed cargoes, … and others are also indicating interest to import in August and September,” Farouk Ahmed, head of the NMDPRA, said on Monday.

Nigeria imports almost all its refined fuel due to inadequate refining capacity and neglect of existing refineries.

In June, the average daily petrol consumption fell to 48.43 million litres (13 million gallons), down from a daily average of 66.9 million litres in January through May before the subsidy was removed, according to figures from the NMDPRA.

Many analysts and experts, including those of the World Bank, have repeatedly warned the Nigerian government to remove costly petrol subsidies that haemorrhaged government expenditure.

President Bola Tinubu, on day one, said the subsidy was gone, sending the market into a tailspin as prices more than doubled overnight. Since then, many Nigerians have been demanding palliatives and government programmes to cushion the impact.

However, there are concerns that unless properly managed, Nigeria could substitute fuel subsidy with other costly programmes that would have little impact on the people.

With petrol subsidy removed, marketers are being forced to compete on cutting costs and improving efficiency in their operation as demand for petrol declines following the 15 percent hike in prices.

“Subsidy” became a national buzzword in 2012 when the then-President Goodluck Jonathan announced its removal. Petrol prices increased from N65 to N140 per litre and triggered almost two weeks of protests, known as ‘Occupy Nigeria’, causing the government to reverse the decision.

GanagiBitrus:


&yet no single protest for severe hardship due to fuel price increase from N210 to N620 in less than 2monrhs.

mrvitalis:
I honestly think we can tax each litre #150 per litre... Give diesel and kerosene tax free because those are used by industries and poor people respectively

But that's not the issue... The issue is what we need to do from now

Like Peter Obi said we need to start pulling people out of poverty from day one

If I was president

1) call a meeting between the house of assembly leadership, judiciary and the banks lead by CBN instantly to find legal framework for what I'm about to do

2) source for 25 trillion naira , from loans and government funds... Give it to the bank at say 3% interest rate with a 4 years no payment period... Raised at say 5 trillion per year

a) banks would loans this money out to business... Only business at an interest rate not more than 10% with a 3 years no payment period

b) this loans would be given to cooperatives and manufacturers in only import substitution or exportable products (that we can produce below international market)

c) to access the loan you must show you can produce such product at a price not more than the landing cost of the product for import product or less than the international price for export product

d) large importers should encouraged to take up loans and produce what they import in some key sectors that we can have comparative advantage

2) garment factories and leather factories should be given priority along with fruit concentrate, ethanol production, Industrial chemical formulation, pharmaceutical industry and improve seedling Industries... Others are chocolates, peanuts and metal refineries

This would create over 5 million direct jobs, cover more Industries into the tax bracket... Increase revenue by over 5 trillion per year

That's the Koko

Not building phantom infrastructure that can't generate revenue for now... Not handing out peanuts

I rest my case

pandoragirigory:
Nigeria has the cheapest fuel in Africa

Xammie001:

BRO THIS SAID IS BRILLIANT BUT DO YOU KNOW THAT BANK OF INDUSTRY IS DOING THIS AND MANY NIGERIANS ARE JUST SELFISH AND GREEDY

Xammie001:
IT'S EVIDENT PEOPLE LIKE YOU EHN, DURING JONATHAN'S TIME THERE WAS EXCESS CRUDE OIL ACCOUNT WHERE WE DON'T NEED TO BORROW MONEY TO PAY FOR SUBSIDY AND WE HAD MORE THAN ENOUGH TO GO ROUN, NOW THE CRUDE MARKET IS BAD THAT WE HARDLY MAKE ANY EXCESS YET YOU WANT THE FG TO KEEP PAYING FROM WHERE,AND IF THEY BORROW NA YOU GO DEY SHOUT.
OGA PLEASE STUDY TO SHOW THYSELF APPROVED ABEG

mrvitalis:
I honestly think we can tax each litre #150 per litre... Give diesel and kerosene tax free because those are used by industries and poor people respectively

But that's not the issue... The issue is what we need to do from now

Like Peter Obi said we need to start pulling people out of poverty from day one

If I was president

1) call a meeting between the house of assembly leadership, judiciary and the banks lead by CBN instantly to find legal framework for what I'm about to do

2) source for 25 trillion naira , from loans and government funds... Give it to the bank at say 3% interest rate with a 4 years no payment period... Raised at say 5 trillion per year

a) banks would loans this money out to business... Only business at an interest rate not more than 10% with a 3 years no payment period

b) this loans would be given to cooperatives and manufacturers in only import substitution or exportable products (that we can produce below international market)

c) to access the loan you must show you can produce such product at a price not more than the landing cost of the product for import product or less than the international price for export product

d) large importers should encouraged to take up loans and produce what they import in some key sectors that we can have comparative advantage

2) garment factories and leather factories should be given priority along with fruit concentrate, ethanol production, Industrial chemical formulation, pharmaceutical industry and improve seedling Industries... Others are chocolates, peanuts and metal refineries

This would create over 5 million direct jobs, cover more Industries into the tax bracket... Increase revenue by over 5 trillion per year

That's the Koko

Not building phantom infrastructure that can't generate revenue for now... Not handing out peanuts

I rest my case

MRMRMR:

I like write up like yours, where ideas are put forward. No some ignoramus who will throw issults on NL

Xammie001:
IT'S EVIDENT PEOPLE LIKE YOU EHN, DURING JONATHAN'S TIME THERE WAS EXCESS CRUDE OIL ACCOUNT WHERE WE DON'T NEED TO BORROW MONEY TO PAY FOR SUBSIDY AND WE HAD MORE THAN ENOUGH TO GO ROUN, NOW THE CRUDE MARKET IS BAD THAT WE HARDLY MAKE ANY EXCESS YET YOU WANT THE FG TO KEEP PAYING FROM WHERE,AND IF THEY BORROW NA YOU GO DEY SHOUT.
OGA PLEASE STUDY TO SHOW THYSELF APPROVED ABEG

mrvitalis:

There was excess crude account because we saved.... Oil is above bench mark yet where is the excess crude account?

You remember tinubu was against the excess crude account?
In his words why save when you have project to do

Now u want to talk?

GanagiBitrus:

Whatever the justification for FS removal is arguable, but you should realise that cost of living has suddenly gone up & subjected the average Nigerian to hardship, & that's what matters most to the average Nigerian.

Xammie001:
NOW I CAN ENGAGE BECAUSE I SEE YOU HAVE DATA AND FIGURES.
WHERE IS THE EXCESS CRUDE OIL ACCOUNT NOW?TINUBU SAID THAT BECAUSE YOU CAN USE MONEY TO MAKE MONEY INSTEAD OF KEEPING OF SAVING IT.

mrvitalis:

I have a factory and the least loan you can get now is 30% per year some go as high as 50%

I was offered 40%

Access to credit is the most important factor hindering business in Nigeria... Not even power, not infrastructure... The interest rate is key

Nigeria is the only place in the world where people who haven't had a business before run the country and formulate policies for businesses....

Like obi said government is the number one killer of business in Nigeria via so many factors

Another thing is since the money is not banks money u can limit them on who to loan it to

Banks now mostly loan to real estate developers and politicians... Manufacturers make less than 20% of loans from banks

Xammie001:
THE PERCENTAGE IS HIGH BUT I FEEL THEY WILL GIVE YOU SOME EASE AT A PARTICULAR POINT.
SOME PEOPLE WILL COLLECT LOAN AND THE PURPOSE OF THE LOAN WOULD BE DEFEATED DUE TO GREED

mrvitalis:

Do you understand what excess crude oil is? Let me explain

When budgeting we set a benchmark that is a target that crude oil should sale and base our budget based on that

So if we set a benchmark of say $75 and crude sales for $85 dollars... Our share as a nation goes into excess crude account... Because it's more revenue than we planed to receive...

APC never saved anything meaningful even when crude sold way above our benchmark...

So who should u be asking APC or PDP?

mrvitalis:

Do you understand what excess crude oil is? Let me explain

When budgeting we set a benchmark that is a target that crude oil should sale and base our budget based on that

So if we set a benchmark of say $75 and crude sales for $85 dollars... Our share as a nation goes into excess crude account... Because it's more revenue than we planed to receive...

APC never saved anything meaningful even when crude sold way above our benchmark...

So who should u be asking APC or PDP?

Xammie001:


HARDSHIP YOU SAY?
MOST OF YOU ARE JUST FAKE AND NO IOTA OF TRUTHFULNESS IN YOU?
WHY ARE WE DEPENDING ON A FOREIGN COUNTRY TO FEED US,WHY ARE WE EXPORTING THE LITTLE FOOD WE HAVE CULTIVATE ALL BECAUSE OF PROFIT?
WHY ARE WE DESTROYING FARM LANDS?
WHY ARE WE NOT SUPPORTING GOVERNMENT POLICIES BECAUSE OUR CANDIDATES DIDN'T EMERGE?
HOPE YOU KNOW THE COUNTRIES WE ARE USING TO JUDGE ARE IN RECESSION E.G AMERICA

GanagiBitrus:

Unless you are not in Nigeria, you can not pretend there's no increased hardship for the average Nigerian.
Good Governance is all about improving the living conditions of the governed. Any policy contrary to this should be jettisoned. Subjecting Nigerians to hardship can only be justified if there are immediate or at least short/mid term benefits. So far, nothing in view as per this.
I believe certain measures like functional refineries should have been put in place b4 the FS removal. The abrupt removal is akin to extracting a rotten tooth without anaesthesia.

Not an economic expert, but there are economic stimulants like Security & Stable power supply etc that will boost productivity & attract investments, local & foreign. It is the onus of Govt to look in this direction.

Xammie001:


OK ALL YOU ARE SAYING ARE JUST BASED ON YOUR EMOTIONAL STATE.
ELECTRICITY HERE IN IKORODU WE ENJOY OVER 22 HRS SUPPLY, INVESTMENTS MY COMPANY HAS OVER 5 COMPANY BASED IN ODOGUYAN,IKORODU ALONE, SECURITY WE HAVE SECURED ENVIROMENT BUT ALL YOU ARE HERE TALKING ABOUT HARDSHIP IS BECAUSE WE LACK LOVE AND UNITY FOR ONE ANOTHER THEN WE SHOULD BLAME THE GOVERNMENT .

PLEASE THE PROFIT MADE LAST MONTHS ALONE SAYS ALOT,PLEASE READ ,READ AND READ AND STOP JUDGING USING EMOTIONS
THANKS