Oil marketers have cried out that their businesses are suffering due to the spike in the pump price of petrol as a result of the ongoing conflict in the Middle East.
They lamented that they now require a much larger financial outlay to get a truck of petroleum products, with very low returns that may be inadequate to cover the high interest rates on the loans they obtain from banks.
They said that demand for petroleum products by their customers has dropped drastically, as some of those who used to buy 20,000 litres or 10,000 litres now buy about 2,000 or 1,000 litres.
The volatility in Nigeria’s downstream petroleum sector has pushed petrol prices from an average of N839 per litre to over N1,230 per litre in recent weeks.
The surge in prices is linked to rising global crude oil prices, which have climbed above $104 per barrel amid escalating tensions involving the United States, Iran, and Israel.
What they are saying
Oil marketers say the rising cost of petrol supply has increased the financial burden on operators, many of whom rely on bank loans to finance purchases of petroleum products.
- “This is a product we were getting with around N50 million, now we are getting it with more than N60 million or N70 million per truck, and the bank will bill us. All those loans we collect from banks—the interest rate is high,” said the National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Ukadike, in an exclusive interview with Nairametrics.
- “The turnover, the financial and cash value turnover is higher and the dividends are low. There is no stability, and up till now, we are still borrowing from banks to be able to meet demand and supply,” he added.
Another oil marketer, Anwalu Ahmed, said petrol pricing is influenced by replacement cost, noting that marketers must consider the cost of the next shipment when setting prices.
- “If the next cargo you bring in will cost significantly more due to exchange rate changes or international prices, marketers adjust prices to avoid selling at a loss,” he said.
Ahmed explained that if marketers continue selling petrol at old prices despite higher replacement costs, they risk losing capital needed to bring in new supplies, which could eventually lead to shortages.
More Insights
Industry players say the rising cost of petrol has significantly reduced demand, as many consumers are cutting back on purchases due to the high prices.
- According to Ukadike, customers who previously bought between 10,000 and 20,000 litres of petrol are now purchasing between 1,000 and 2,000 litres due to the higher cost.
- He also highlighted the risks faced by fuel transporters, noting that tanker drivers sometimes spend three to five days on highways because of poor road conditions.
The delays, he said, increase operational risks for marketers who may have trucks carrying petroleum products worth over N65 million on the road.
- Ukadike added that the stress associated with transporting such high-value cargo under difficult conditions has taken a toll on many operators in the sector.
These challenges, marketers say, have made the downstream business increasingly difficult despite the higher pump prices.
Palliatives for Nigerians
Stakeholders have also called on the Federal Government to introduce measures to cushion the impact of rising petrol prices on businesses and consumers.
- The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has urged the government to provide palliatives for transportation costs to ease the burden on Nigerians.
- The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, warned that rising energy costs could threaten the survival of small and medium-scale enterprises (SMEs).
He noted that many businesses are already struggling with difficult macroeconomic conditions, making the increase in fuel prices particularly concerning.
CPPE advised businesses to review pricing strategies, strengthen value propositions, and consider smaller product sizes or alternative packaging to manage rising costs.
The organisation said such measures could help businesses remain competitive while coping with the rising cost of energy.
What you should know
Labour groups have also raised concerns over the impact of rising petrol prices on Nigerian workers.
- The Nigeria Labour Congress (NLC) recently called on the Federal Government to urgently intervene following the surge in petrol prices to between N1,230 and N1,300 per litre across the country.
- NLC President Joe Ajaero said the increase has worsened the economic hardship faced by workers.
- According to him, the higher fuel prices are driving up transportation costs, food prices, and the overall cost of living.
The labour union has therefore urged the government to introduce urgent relief measures to cushion the impact of the fuel price increase on workers and vulnerable citizens.
