Fuel imports suspended as marketers propose N720 per litre as naira depreciates

In light of the ongoing fluctuations in the parallel market exchange rate, oil marketers have expressed concerns that the cost of Premium Motor Spirit (PMS), commonly referred to as petrol, may see an increase in the coming weeks. Should the dollar continue trading between N910 and N950, petrol prices could potentially range from N680 per litre to N720 per litre.

The scarcity of foreign exchange has significantly impacted importers seeking to bring in PMS, leading to the postponement of import plans. This concern has arisen alongside the naira’s recent crossing of the N900 per dollar mark, with the currency trading at over 945 per dollar in the parallel market.

Marketers have indicated that the official foreign exchange window for importers and exporters, which offers a lower exchange rate of around $740 per litre, is currently illiquid. This inadequacy in foreign exchange availability has hindered the necessary funding, estimated at $25 million to $30 million, required for petrol importation by dealers. Consequently, many dealers who initially had intentions to import petrol have suspended their import activities.

While the sole marketer Emadeb, who recently imported the commodity, faces challenges in recovering investments due to the naira’s depreciation, other senior officials from major oil dealers have suggested that a potential increase in PMS price looms unless the local currency strengthens in the upcoming weeks.

Leaders of various oil industry associations have highlighted the necessity of government intervention to address this crisis. Chief Chinedu Ukadike, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, emphasized that petrol prices are now influenced by forex fluctuations, and the Nigerian population should prepare for a potential price hike.

Ukadike explained that petrol prices are linked to the fluctuating exchange rate, and a rise in the dollar’s value would directly impact the cost of petroleum products. He also emphasized that forex demand is not exclusive to the petroleum sector, as various other importers also compete for limited forex reserves.

As the naira struggles against the dollar, oil marketers continue to source dollars from the parallel market due to the illiquidity of the official Importers and Exporters window. Ukadike cautioned that if the exchange rate remains between N910 and N950 per dollar, consumers should anticipate a price range of N680 to N720 per litre. Should the dollar rise to N1,000, the price could potentially reach N750 per litre.

Ukadike noted that the Nigerian National Petroleum Company Limited remains the primary importer of petrol, although another importer, Emadeb, recently entered the market. He clarified that the depreciation of the naira poses challenges for independent importers, making it difficult for them to recover funds and continue importing.

As the Nigerian National Petroleum Corporation (NNPC) serves as the main distributor of petroleum products, any price changes at their outlets are likely to set a precedent for other marketers to follow suit. Despite recent government licenses issued to several marketers for product imports, the illiquidity of the foreign exchange window has hindered actual importation.

Clement Isong, the Executive Secretary of the Major Oil Marketers Association of Nigeria, echoed the sentiment that dealers are currently refraining from importing petrol due to these challenges. He acknowledged that despite licenses issued to some marketers, the illiquidity of the I&E window has made forex sourcing difficult.