The CEO of Rainoil Ltd, Dr. Gabriel Ogbeche has stated that the current high price of fuel in Nigeria is primarily driven by the exchange rate and not necessarily the price of crude oil in the international market.
He disclosed this during an interview on Channels Television Business Morning program where he noted that the federal government fully deregulated the petroleum industry in October this year and there has been some tacit subsidy even after the President’s announcement in May 2023.
According to him, fuel prices in Nigeria are determined by two variables; crude oil prices and the exchange rate of the Naira to the U.S. dollar.
He explained that while crude oil prices have been relatively stable, the same cannot be said of the exchange rate.
In his words, “I think the most important thing that happened recently is the full deregulation of the downstream sector. For more than 20 years we have been clamouring for deregulation and finally this month we have seen the federal government cutting the sector loose.”
“There are two key things that drive the price of petroleum products; the price of crude oil and most importantly the exchange rate.
“The price of crude oil has been stable in the last couple of years around $60 to $80 per barrel but the biggest elephant in the room has been the exchange rate. We have seen the massive devaluation in the value of the Naira and I think that the relatively high prices of petrol are driven more by the exchange rate and the impact on the price of petrol.”
Petrol prices in October
The price of petrol crossed N1,000 per litre in major retail stations across the country following the announcement by the NNPCL on the sale of crude oil to the Dangote refinery in Naira.
The National Bureau of Statistics (NBS) reports that the average retail price of Premium Motor Spirit (petrol) in September 2024 stood at N1,030.46, reflecting a 64.55% rise compared to N626.21 in September 2023. Similarly, the average price increased by 24.08% from N830.46 recorded in August 2024.
President Tinubu’s reforms
During his inauguration last year, President Tinubu announced an end to the fuel subsidy regime promising a market-reflective pump price of petrol.
Two weeks later, the Central Bank of Nigeria (CBN) announced the unification of all the segments of the foreign exchange market leading to the Naira losing over 50% of its value.
Petroleum products are an international commodity and priced in U.S Dollars hence the weakening of the Naira will lead to higher petrol prices and vice versa. The Naira currently exchanges to the dollars in the region of N1,600/$.
