The soaring prices of petrol in Nigeria are largely attributed to the weakened exchange rate, not fluctuations in crude oil prices on the international market. This insight was provided by the CEO of Rainoil Ltd, Dr Gabriel Ogbeche, during a recent interview on Channels television Bussines Morning Program.
Dr Ogbeche explained that while crude oil prices have remained relatively stable, the sharp depreciation of the Naira against the U.S. Dollar has been the main factor driving the high cost of fuel in the country. He highlighted that Nigeria’s full deregulation of the petroleum industry, which took effect in October, has further exposed the sector to market forces, particularly the volatility of the exchange rate.
“There are two key factors that influence the price of petroleum products: crude oil prices and, more importantly, the exchange rate,” Dr Ogbeche remarked. He noted that crude oil prices have remained within the range of $60 to $80 per barrel in recent years, but the primary challenge is the depreciation of the Naira. He emphasised that the devaluation of the currency has significantly increased the cost of petrol, pushing prices higher than anticipated.
Petrol prices in Nigeria surpassed the N1,000 per litre mark in major retail outlets after the Nigerian National Petroleum Company Limited (NNPCL) announced its decision to sell crude oil to the Dangote Refinery in Naira. The National Bureau of Statistics (NBS) reported that the average retail price of petrol in September 2024 stood at N1,030.46 per litre, representing a 64.55% rise compared to N626.21 in September 2023. The price also increased by 24.08% from N830.46 recorded in August 2024.
The deregulation of the downstream sector, long anticipated by industry stakeholders, was fully implemented in October, marking a significant shift in Nigeria’s petroleum industry. Dr Ogbeche reflected on this development, stating, “For more than 20 years, we have been calling for deregulation, and now, we are witnessing the federal government cutting the sector loose.” He acknowledged that while deregulation was necessary, it has also intensified the effects of the exchange rate on fuel prices.
President Bola Tinubu’s decision to end the fuel subsidy regime shortly after his inauguration in May 2023, combined with the Central Bank of Nigeria’s (CBN) unification of the foreign exchange market, resulted in the Naira losing more than 50% of its value. This has significantly contributed to the rise in petrol prices. As petroleum products are priced in U.S. Dollars, they are directly impacted by the exchange rate, with the Naira currently trading at approximately N1,600 per U.S. Dollar.
The combination of deregulation, exchange rate fluctuations, and global market dynamics continues to shape the cost of petrol in Nigeria, as the country grapples with the challenges of maintaining a market reflective pump price.