Fuel prices in Nigeria have once again become a source of tension following Dangote Refinery petrol price hike Nigeria an increase in prices by the Dangote Refinery.
The Dangote Refinery has increased the ex-depot price of Premium Motor Spirit (PMS) from N1,200 per litre to N1,275 per litre.
What Happened?
Based on industry insights:
- Ex-depot petrol price increased by N75 per litre
- Petrol price is now N1,275 per litre
- Coastal supply price increased to N1,215 per litre
This development will surely affect fuel marketers and subsequently fuel buyers as well.
Suppliers’ Issues Make Matters Worse
The price increase did not occur in isolation.
It turns out that the refinery had also discontinued using its Proforma Invoice (PFI) system, through which the purchase of bulk fuels was carried out.
The disruption:
- Paused sales of petrol and diesel fuel (AGO)
- Affected the process of supply planning
- Uncertainty about fuel marketing
The problem stems from many challenges, both at local levels as well as on an international level.
1. Rising Cost of International Crude Oil
Nigeria’s fuel cost is highly influenced by the international market for oil products.
- Brent Crude Oil: $114.80 per barrel (+3.15%)
- West Texas Intermediate: $103.40 per barrel (+3.49%)
An increase in the cost of international oil results in higher costs associated with refining the fuel and, therefore, a rise in fuel costs.
2. Geopolitical Instability
The latest increase in fuel cost can be traced back to geopolitical instability experienced in the Strait of Hormuz, the main passage of oil products in that region.
The effects would definitely be felt internationally.
3. Restrictions in the Supply Chain
This includes all aspects of disruption mentioned above:
- Limitations on the amount available for supply
- Uncertainties in marketing
- Logistical issues with fuel supply
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Implications of This Trend for Nigerians
The following impacts would be immediate on consumers:
- High fuel prices at the petrol stations
- High cost of transport
- High prices of goods and services
Businesses, particularly SMEs, could experience high operational costs as a result of this development.
Market Response: What’s Next?
Petrol marketers are already bracing for higher prices, with most expecting:
- Rapid increase in price at depots
- Slow increase in price at petrol stations
- Volatile trends if crude oil prices stay high
Now, the only thing that will determine how high prices will go is whether supply stabilizes or gets more disrupted.
Conclusion
The following scenario points to the general truth about Nigeria; despite its refining capacity, fuel prices in the country are heavily dependent on international oil trends.
Until stabilization in the supply chain and a fall in global crude oil prices come into effect, fuel prices will continue fluctuating.
