The Major Oil Marketers Association of Nigeria (MOMAN) has said that foreign exchange and international crude prices contribute over 80% to the recent fuel pump price increase.
The Association stated this in a July 19 press release.
According to MOMAN, the international price of crude oil and the exchange rate constitute the largest components of the cost build-up for Premium Motor Spirit (PMS) also known as fuel, accounting for over 80%. Meanwhile, the remaining 20% includes statutory dues, distribution costs, and margins.
In its press release, MOMAN notes that deregulation promises a transparent and level playing field where cost-reflective prices are evident at fuel stations.
So, it follows, therefore that in a liberalized market, the pump price of PMS should accurately reflect the current economic realities.
A part of the release stated:
- “In recent months, the price of PMS has remained relatively stable. On 30 May 2023, Platts reported a price of $827 per metric ton (MT), and on 14 July 2023, it was $859.25 per MT. However, there has been a significant increase in the foreign exchange rate.
- “We can infer from our calculations in May that the Nigerian National Petroleum Company Limited (NNPCL) determined its pump price using an exchange rate of about N630 to the US Dollar, while banks reported an exchange rate of approximately N650 on the Investors and Exporters (I&E) window.
- “As of today, the liquid exchange rate is close to N825 to the Dollar. This devaluation adds N100 to the cost of importing a single litre of PMS into the country. Consequently, an increase in the pump prices of petrol should be expected.”
The way forward
MOMAN said that following the current situation, it is only right for the government across all levels, and employers, to implement palliative measures to support less privileged individuals in society currently facing hardships.
The group made it clear that it is supportive of market deregulation, however, operators and regulators must engage the public transparently, earn public trust, and foster fair competition that ensures full value for customers at the fuel pumps.
A part of the statement also stated:
- “Some operators have successfully imported PMS into the country, marking the first practical step towards a liberalized market. However, the major challenges still lie in accessing foreign exchange for imports and ensuring a level playing field regarding pump prices.
- “If marketers are undertaking the financial risk of importing petrol, measures must be in place, in line with the Petroleum Industry Act, to ensure that no one player has an unfair advantage.”
MOMAN also advised those who can afford a switch to other energy sources like diesel, solar, and gas for their homes to do so in a safe manner. They also advised the government to promote the use of liquefied petroleum gas (LPG) and compressed natural gas (CNG) for intercity buses, tricycles (Keke), minibuses, and taxis to power vehicles.
Ways to ensure success in fuel subsidy removal
MOMAN also highlighted three core areas that would ensure the successful implementation of the fuel subsidy removal:
- Effective and sustainable implementation of the gains from subsidy removal – These gains should be invested in transparent, and timely palliatives, including subsidized transportation, as well as social investment programs for healthcare, education, and infrastructure development (such as roads, railways, and power).
- Increased oil production – Focused and sustained increase in our national production of crude oil from the current 1.2 million barrels per day to closer to 2m barrels per day – this will bring much-needed foreign exchange.
- Expressing accountability – Ongoing engagement and accountability to Nigerians concerning the first two points. We firmly believe that transparency and engagement are essential for building public trust and understanding.
