What the NNPC failed to mention after saying fuel prices had dropped

The Nigerian National Petroleum Corporation (NNPC) has announced the results of a survey it recently carried out which showed a drop in petrol and cooking gas prices across the country. According to the survey, petrol prices have fallen from N145 to between N142-N143 per litre.

Cooking gas prices have also fallen from N2500 for a 12.5kg cylinder to N2215.96.
The statement signed by Ndu Ughamadu, the Group General Manger Corporate Affairs also stated that the corporation had embarked on a rehabilitation of some of its critical pipeline and networks.

Recent data released by the National Bureau of Statistics (NBS) also shows that the average petrol price paid by motorists fell from N150.3 in June 2017 to N148.2 in July 2017. The average cost of refilling a 12.5kg cylinder decreased from N4479.91 in June 2017 to N4374.91 in July 2017.
Minister of State for Petroleum, Ibe Kachikwu had in a recent podcast also suggested that petrol prices would trend lower as private sector operators enter in the industry and operate more efficiently.

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The fall in price isn’t a permanent one

Even though the drop in pump prices is good news, the fall is a marginal one and may not be permanent. A significant proportion of the petrol consumed in the country is imported. Petrol prices are thus closely related to crude oil prices and the country’s exchange rate. An Increase in crude oil prices, will lead to an increase in the landing cost of petrol.

Nigeria’s dollar revenue is closely tied to the volume of crude oil exported and prices in the international market. A drop in either variables, could lead to a depreciation of the Naira. A depreciation of the Naira against the dollar, will lead to more expensive petrol. The survey does not take into consideration the prices of petrol in rural areas which tend to be significantly higher.

The NNPC is able to deliver petrol at a cheaper rate, since it has access to foreign exchange and is not struggling with previous subsidy payments which have weighed down major petroleum marketers. Petroleum marketers in the country recently called on the government to pay arrears of subsidy payment to prevent a mass retrenchment of workers.