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Breaking down the rise in fuel price conundrum in Nigeria 

The question is, should Nigeria return to the fuel subsidy regime or in fact, is the government still paying subsidies on fuel?



In the past few years, consecutive hikes in domestic fuel, kerosene and diesel prices always precede protests (usually online) as Nigerians constantly reject high fuel prices. The blame is usually pinned to the costs of importing fuel and other petroleum products into the country as seen in the image below.

Every month, the figures above are subject to changes. The most important figures in the list are the cost of Brent Oil – currently at ($62.22) according to the template and the average FMDQ Importer $ Exporter (I&E) Naira/USD Exchange Rate – $403.80. 

READ: NNPC says no plans to increase pump price of petrol

Notably, these figures are based on the average costs from 1st – 28th of February 2021.

It is important to note the current Brent Oil price as at the time of writing is at $69.41 per Barrel after pushing the highest finish for the front-month contract is May 28th 2019. Additionally, the FMDQ  importer and exporter (I & E) naira/usd exchange rate as at 12th March 2021 closed at N410 after reaching a day high at N412.

If these figures (Brent oil price and Exchange rate) stay consistently on the upside- which is very likely, retail fuel prices would be high. There is an empirical direct relationship between both.

The Conundrum

Here is a look at the few issues concerning a potential petrol price increment.

What will be the reasons for the potential hike in fuel prices?

The two major factors responsible for a potential increase in fuel prices are the volatility in foreign exchange rates and the continued rise in international crude oil prices. During the pandemic, the Naira depreciated against the dollar as a result of dwindling foreign revenue and earnings. Technically, as we import refined petroleum products, the importers are subject to the exchange rate at the I&E window which is currently at $410 as at 12th March 2021.

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You might ask, why will an oil-producing nation be affected by a continued rise in international crude oil prices?

READ: CBN Governor says Dangote refinery will sell refined products to FG in Naira

Although the 212 naira valuation has been debunked by the authorities, there is mutual exclusivity with producing oil and importing refined petroleum products. In a country that does have a refinery that works in an optimal capacity, Nigeria will be subject to import charges that come with importing petroleum products.

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To buttress this – The United States of America averages 11.3 million barrels per day (b/d) in 2020 which is immensely higher than the 1.79 million barrels per day (b/d) in 2020. However, fuel prices per litre is estimated at N331 to Nigeria’s purported N212 (using $403.80 as conversion rate).

READ: Nigeria and its long standing fuel subsidies

Will oil prices and exchange rates continue rising?

Earlier in the week, I wrote that once oil prices break through that psychological $70 barrier, we might be in for a breakout in higher oil price. The prices of oil have significantly increased and as we approach the one year anniversary of negative oil prices we experienced last year, it is a commendable effort that prices have reached these levels. It appears that oil-producing countries are milking out of the high prices we are experiencing and a lot of economic agents (countries and consumers) are hurting as a result. OPEC+ have decided not to increase production and there are fears the oil markets are tightening as a result of that decision. In a Donald Trump administration, OPEC’s excesses would have been checked as he clamoured for lower gasoline prices for his citizens.

The Naira-Dollar exchange rate would also be subject to increase as the forex market is under siege from currency speculators who are racketeering and profiteering from the shortage of dollars in the economy.

The shortage issues are being addressed by the CBN and is one of the underlying motives for the introduction of the Naira for Dollar promo currently championed by the Central Bank.

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What is the main problem with fuel prices in Nigeria?

Protagonists of the government are of the opinion that fuel prices are a reflection of the economics of importing oil. To buttress their points, they compare the prices of fuel in Nigeria to prices of fuel in other oil-producing countries.

To be candid, the protagonists are right. That’s the way the cookie crumbles in other countries.

Based on data available with as at 8th of March 2021, fuel prices in the following oil contemporary nations are mixed depending on different factors (tax, freight and exchange rates). Still abiding by a 408 naira to $1 conversion rate, The fuel price in Saudi Arabia has increased to N210 ever since President Buhari’s tweet above. Egypt fuel prices have also increased to N220 a litre, Russia is at N263 per litre. Togo and Ghana stand at N312 and N380 respectively.


READ: Oil prices soar above $70 a barrel over terrorist attacks on Saudi’s oil station

Similarly, Angola, our major rivals in the oil production ranking in Africa, retail fuel at N105. However, this is an outlier as the Angolan government pays heavily for fuel subsidies which people are still contesting. The Petroleum Minister of India, Dharmendra Pradhan, who is also facing the heat in respect to increasing fuel prices said this earlier to defend the retail prices – “Generally, the prices of petroleum products in the country are higher/lower than other countries due to various factors, including the prevailing tax regime and subsidy compensations by the respective countries.”

On the other side of the debate, Nigerians do not care about what other countries are selling fuel at. They want cheap fuel as their purchasing power is different from the Saudi Arabians and Russians.

READ: Nigeria’s external reserve falls to lowest in 10 months

This is also correct.

According to data extracted from a Quarter 2020 data by Bloomberg, the average daily income of Nigerians is at $5.11 which is 2,084 naira. (408 to $1). The data shows that it takes 6.55% of a day’s wages to afford a liter of gas. This is relatively higher than the affordability percentages of U.K (1.23%), Russia’s (2.28%), United States (0.37%) and Saudi Arabia’s (0.46%).

The debate

The question is, should Nigeria return to the fuel subsidy regime or in fact, are the government still paying subsidies on fuel? There is a lot of opacity around the subsidy removal scheme.

The lack of transparency and translucency in the government’s promises and policies keeps everyone in the dark on the debate of subsidy.

Last week, the Minister of State disowned the increase in the price of petrol as announced earlier by the Petroleum Products Pricing Agency, PPPRA. Although the agency later deleted the N212 retail price, the kite has already been flown. The Minister of State for Petroleum, Timipre Sylva says he and President Muhammadu Buhari, who also seats as the Minister of Petroleum were not informed about PPPRA’s decision and “the pump price of petrol was not approved to be increased by one naira”

READ: N250bn to be spent to fund compressed Natural Gas infrastructure

In a deregulated, “free market” and non-fuel subsidized economy, retail petrol prices fluctuate with respect to both global crude prices and exchange rates.

So the question is what economics is at play for a Minister to say, the “pump price of petrol was not approved?” Especially when the Minister also said one year ago, that the President will not intervene in fixing the pump price in the country again.


The almost 30% increase in fuel prices announced by the PPPRA will be challenged by the union and Nigerians in entirety. Despite political differences, Nigerians always unite to fight fuel hikes as “suffer” does not know political party. In the short-term, how will the government fix this faux pas? Are they insinuating the fuel price will never increase? Is the gaffe the reality of things the petroleum importers are facing?

As I usually say in a game of musical chairs, somebody will eventually lose a seat.

Dapo-Thomas Opeoluwa is an Investment Banker and Energy analyst. He holds a degree in MSc. International Business, Banking and Finance from the University of Dundee and also holds a B.Sc in Economics from Redeemers University. As an Oil Analyst at Nairametrics, he focuses mostly on the energy sector, fundamentals for oil prices and analysis behind every market move. Opeoluwa is also experienced in the areas of politics, business consultancy, and investments. You may contact him via his email- [email protected]

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FG gives completion date for Apapa-Oshodi-Ojota-Oworonshoki road project

The government said the reconstruction/rehabilitation of the expressway will be completed within 9 to 10 months.



AfDB's Akinwumi Adesina and Ekiti State Governor Kayode Fayemi, AfDB to support Ekiti State road and airport upgrade

The Federal Government has given a timeline for the completion of the Apapa-Oshodi-Ojota-Oworonsoki expressway project.

The government said the reconstruction/rehabilitation of the expressway which was inaugurated by President Muhammadu Buhari in November 2018, to resolve the Apapa traffic gridlock, will be completed within 9 to 10 months.

This disclosure was made by the Federal Controller of Works in Lagos, Mr Olukayode Popoola, during a joint inspection with the Nigerian Ports Authority (NPA) on Saturday, April 17, 2021.

He assured that section one of the project would be completed within 3 weeks and thereafter opened for use.

Popoola said that the rehabilitation works, which had been divided into four sections to ease port congestion and gridlock at the Apapa axis, have section one which spans from Liverpool Round through Creek Road to Beachland near Sunrise and is about 10 km, while section two is 8.4 km and spans from Beachland to Cele Bus Stop.

Briefing the press after the inspection that also had in attendance the NPA Managing Director, Hadiza Usman, and the Hitech Construction Company, the subcontractor handling the project on behalf of the Dangote Group, Popoola said that grey areas such as accessibility due to trucks infringing on construction zone and disagreements on the pace of construction had been resolved.

What the Federal Controller of Works in Lagos is saying

Popoola said that the inspection gave the NPA team the opportunity to see for themselves that the contractor had been working progressively.

He said, “And this section that we are is the end of section one which we have completed. We will complete the remaining portion within the next three weeks, especially the asphalt work.

So within that three weeks, the outstanding works will be completed fully and then the section one will be made available to the motorists.

We (FMW) also complained about the trucks that are infiltrating the road while we are working. We have told them (NPA) that we cannot allow trucks to flock onto the section where we are working because they will disturb the contractor.

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So the trucks will now be monitored and controlled fully. Both the NPA security, the Nigerian Police, LASTMA and then the contractor’s representative will form a synergy to work out how they will be controlling the trucks that enter into the port road henceforth,’’ Popoola said.

He said the contractor is expected to move to site to start the construction works on section two of the project based on agreement adding that work on sections three and four had reached an advanced stage, with over 70% completion reached cumulatively.

Popoola said that the entire project would be completed and handed over within the next nine to 10 months, including section two which had just been awarded.

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The NPA Managing Director said that agreements were reached on timelines for construction works in order not to disrupt port operations with resolutions that the contractor worked during the weekends and on public holidays to ease congestion.

She said it was resolved that a corridor would be opened for trucks movement in addition to palliative works on some roads and another inspection in three weeks on section one.

The contract was awarded to AG Dangote Construction Company Ltd at the cost of N73bn under the Tax Credit Scheme of the Federal Government.

What you should know

  • It can be recalled that the Federal Government had earlier in the year said that the first phase of the Apapa-Oshodi-Ojota-Oworonshoki project, which has faced several delays, would be delivered in April 2021.
  • The government said that sections one, three and four of the project which was awarded to AG Dangote Construction Company Ltd at the cost of N73bn under the Tax Credit Scheme of the Federal Government, were almost ready and would be completed in April.
  • They had also said that section two of the project which spans from Beach Land bus stop area to Cele Bus Stop which was recently awarded would also be completed in December 2021.

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USSD N42 billion debt: Telcos insist banks have to pay, seek CBN, NCC intervention

Telcos in Nigeria have called for the intervention of the CBN and NCC as they insist that banks have to pay the N42 billion debt for the USSD services.



Bank CEOs, NCC, CBN to meet over USSD charges

Telecommunications companies have insisted that the banks have to pay the N42 billion debt for the Unstructured Supplementary Service Data (USSD) and called for the intervention of the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC) over the dispute.

This follows the accumulation of the debt to the mobile network operators over a period of about 1 year for services rendered to the deposit money banks.

According to a report from Punch, this was made known by the Chairman, Association of Licensed Telecommunications Operators of Nigeria, Gbenga Adebayo, who said that this has become a moral burden on the banks.

What the Chairman, Association of Licensed Telecommunications Operators of Nigeria is saying

Adebayo, in his statement, said, “The over N42bn debt remains outstanding and the banks have to pay the telcos. It has become a moral obligation because the banks used the services, debited their customer accounts and now not paying the telcos.

Who do they expect to pay and what were the deductions made from their customers for USSD services, which you and I were debited for?

What is the deduction meant to for? It’s a debt and the banks have to pay the operators. It’s a moral obligation.”

On the association’s next step should the banks refuse to pay, Adebayo stated that the CBN and NCC would have to intervene.

He said, “We are hoping the regulators, CBN and NCC, having intervened by preventing operators from disconnecting the USSD services, will resolve the lingering debt issues.

 “They (banks) owe the operators and they will pay. Otherwise, where is the money deducted for USSD services from their customers? You and I know we were charged for USSD transactions; what is the deduction meant for?

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What you should know

  • It can be recalled that telecommunication firms under the aegis of the Association of Licensed Telecommunication Operators of Nigeria (ALTON), had threatened to withdraw their Unstructured Supplementary Service Data (USSD) services to financial institutions from March 15 due to the N42 billion accumulated debt.
  • However, following the intervention of the CBN and NCC, the planned action was shelved with both parties (the telcos and the banks), going into a meeting with the Federal Government representatives.
  • As a fallout of the meeting, the CBN and NCC announced the introduction of N6.98 per transaction as new charges for customers using the Unstructured Supplementary Service Data (USSD) services with effect from March 16, 2021.
  • Recently, the Chief Executive Officer, Access Bank Plc, Herbert Wigwe, reportedly stated that Nigerian banks were not indebted to telecommunications firms for using telcos platforms to provide payment services.
  • The statement made the President, Association of Telecommunications Companies of Nigeria, Ikechukwu Nnamani, ask CBN to call the banks to order as regards agreements reached on the settling of the N42bn.

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