The price of Premium Motor Spirit (PMS), commonly known as fuel, is projected to fall below ₦600 per litre once the Federal Government’s crude-for-naira initiative is fully implemented.
Dr. Joseph Obele, the former executive chairman of the Independent Petroleum Marketers Association of Nigeria (IPMAN) in Rivers State, made this claim during a televised interview with News Central TV.
Earlier this year, President Bola Tinubu’s administration approved the sale of crude oil to local refineries in exchange for naira, along with the purchase of petroleum products in naira. This initiative, which aims to stabilise the economy, officially commenced on October 1, 2024, according to the Ministry of Finance.
Potential Price Reduction for Petrol
Dr. Obele expressed optimism about the programme, stating that it would ease certain cost elements that contribute to the pricing of petrol.
He explained, “The selling rate of PMS right now is a combination of seven components. With the naira for crude agreement between NNPC and Dangote Plc, I estimate that four of these seven components will be eliminated. When you remove cost elements, it naturally drives down the unit price of any product. Based on my analysis, petrol should sell below ₦600 when the naira for crude policy takes effect.”
However, not everyone shares Obele’s optimism about a significant drop in petrol prices.
Challenges to Price Reduction
Lanre Toluhi, a political and African affairs analyst, countered Obele’s position, arguing that without a government subsidy, a notable reduction in pump prices might not be feasible. Toluhi pointed to global pricing benchmarks and the potential monopolistic influence of the Dangote Refinery, which could limit competition.
“There is a global benchmark for crude oil. While the refineries may reduce reliance on fuel imports, any price reduction will be marginal unless there’s enough competition,” Toluhi said. “Because of Dangote’s monopolistic advantage, he will likely benchmark his prices against the international market. To achieve lower prices, we need other local refineries operational.”
Crude-for-Naira Initiative Explained
In September, the government highlighted that the crude for naira programme was designed to ease pressure on the naira, reduce transaction costs, and improve the supply of petroleum products across Nigeria. Despite these goals, Nigerians were recently disappointed by the NNPC’s decision to increase petrol prices at its filling stations for the second time in two months.
While the government’s new policy holds potential for reducing petrol prices, the full impact will depend on competitive dynamics in the market and the operational capacity of other refineries. For now, consumers are left waiting to see whether these initiatives will bring the relief they anticipate.