The Nigerian government’s negotiations with the Dangote refinery over the naira-for-crude deal have stalled, sparking fears of a petrol price hikeFuel Price to Rise as Naira-for-Crude Swap Deal Falters in the coming days. The development comes as import costs continue to soar, with the landing cost of Premium Motor Spirit (PMS) increasing by N88 per litre in just one week.
The naira-for-crude deal was introduced to enable the Dangote refinery to purchase crude oil from the Nigerian National Petroleum Company Limited (NNPC) in naira, rather than US dollars. This move was aimed at strengthening the local currency and reducing the country’s reliance on foreign exchange.
However, with the deal currently on hold, the Dangote refinery has suspended the sale of petroleum products in naira, citing a mismatch between its sales proceeds and crude oil purchase obligations. This decision has led to a surge in imported petrol, with seven vessels carrying 115,000 metric tonnes of PMS expected to berth at Nigerian seaports between March 17 and 23.
The increase in import costs, coupled with the suspension of the naira-for-crude deal, is expected to drive up petrol prices in the coming days. The landing cost of PMS has already risen to N885 per litre, N25 higher than the N860 per litre that end-user customers pay for Dangote petrol. Industry experts predict that petrol prices could hit N1,000 per litre at filling stations after adding charges and margins.
The development has sparked reactions from stakeholders in the downstream sector. The Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) has expressed concerns over the volatility of the naira, emphasizing that crude oil transactions are traditionally carried out in US dollars due to its stability and global acceptability. On the other hand, the Major Energies Marketers Association of Nigeria (MEMAN) has stated that those accustomed to price control in the past are resisting the changes occasioned by deregulation.
The Federal Government has yet to make an official statement on the stalled naira-for-crude talks. However, industry sources indicate that the government is under pressure to renew the deal to avoid a petrol price hike and potential fuel scarcity.
The stalled naira-for-crude talks and soaring import costs have created a perfect storm that is likely to drive up petrol prices in Nigeria. As the government navigates this complex issue, it is essential to consider the interests of all stakeholders, including consumers, marketers, and the economy as a whole. One thing is certain – the coming days will be crucial in determining the direction of the downstream sector in Nigeria.