The APC led Nigerian Government finally caved in to demands of most economist by ‘deregulating’ the downstream sector after it declared that it was no longer going to subsidize the price of petroleum products particularly PMS otherwise known as fuel. The Minister of State for Petroleum Dr. Ibe Kachikwu made this announcement and subsequently increased the price of fuel within a band of N135 to N145 confirming that its new policy was that of price modulation rather than price fixing.
In his press statement and further communication on this issue, the Minister informed Nigerians that they had relied on a “black market” price of N285 to the dollar to get the target ceiling price of N145. This admission has made a lot of analysts to believe devaluation of the naira is imminent causing a mini surge on the value of the dollar against the naira. However, by the weekend dollar rates at dropped to like N335 from a week to date high of about N360 on Friday.
Suggestion that the naira may weaken further are rife and has become more likely considering that scarcity of the green back in the interbank market. According to Reuters, Nigeria needs about $18 million daily to ensure that our fuel import bills are met.
Nigeria consumes 45 million litres of gasoline a day, or roughly 280,000 barrels, which would require the market to provide some $18 million a day. Though importers cover about 30 percent of this, with the state oil firm covering the rest, it is still a big strain on the market for dollars.
At $18 million a day fuel imports (including the NNPC) will need over $200 million monthly for fuel imports alone. How the parallel market intends to meet this demand is unclear and could strengthen claims that a further depreciation of the naira at the black market is very imminent. Analysts believe that the only way we may avoid a further weakening is if most of the dollar stashed abroad can find its way back into local bank vaults.
