…As Landing Cost Rises to N180/litre
Unless the Federal government restores the subsidy regime, pump price of Petrol may increase to over N200 per litre in Nigeria, as Brent crude, against which Nigeria’s oil is priced, increased by $1.23 on Monday.
Federal government’s removal of subsidy and deregulation of fuel marketing in the country implied that fuel prices would, at every point in time, be dictated by the world oil price in addition to importation expenses.
For instance, on Monday, Brent crude, against which Nigeria’s oil is priced, increased by $1.23, thereby hitting to $60.57 per barrel. While Nigerian government will made more money by this increase, refineries which buy the crude oil will naturally to the price of the end product (petrol), which is imported for sale in the country.
Another factor that dictates the fuel price is the value of naira. For example, while Nigerian currency suffered devaluation last year, the Naira, on Monday, officially exchanged to dollar at N398.50 to a dollar. And, at the parallel market, it sold at N480 to a dollar.
The price increase, therefore, becomes inevitable, as landing cost of Premium Motor Spirit (petrol) imported into the country rose on recently by 13.34%to about N180 per litre , following the increase in global oil prices.
As a result of the ongoing deregulation regime, other factors determining pump price, therefore, include: freight (N8.74), lightering expenses (N4.57), insurance cost (N0.24), Nigerian Ports Authority charge (N2.38), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N1.33), aall of which took effect from January 7th 2021.
Despite the foregoing, when Naira value drops, it means more Naira will be needed to pay for import of the fuel from the foreign refinery.
But then, private oil marketers have for some time been unable to access enough FOREX to import on their own, hence their continuous reliance on Nigerian National Petroleum Corporation (NNPC) for imported refined petrol.
The pump price is the sum of the landing cost, wholesale margin and the distribution margins. The wholesale margin is N4.03 while the distribution margins comprise transporters allowance (N3.89), retailer (N6.19), bridging fund (N7.51), marine transport average (N0.15), and admin charge (N1.23).
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