Petrol Prices Could Soar Due To Forex Rate Challenges – Oil Marketers Warn

Petrol prices may rise sharply, according to warnings from oil marketers, if they have to source foreign exchange at parallel market rates to import Premium Motor Spirit (PMS), more commonly known as petrol.
They predict that the ex-depot price for petrol could reach as high as N515 per litre under these conditions.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) is calling on the Federal Government to facilitate the process for marketers to begin importing petrol by granting them access to foreign exchange.

Currently, the Nigerian National Petroleum Company (NNPC) is the sole importer of PMS into Nigeria, with other marketers ceasing imports due to their inability to access the US dollar.

Access To Cheaper Forex Rates Becomes A Bone Of Contention

The ex-depot price of petrol, the price at which marketers buy the product from the depot and determine their selling price at filling stations, is currently set at N467.39 per litre by NNPC Retail.
This is possible because NNPC sources dollars at a cheaper rate.

According to an oil marketer, who spoke anonymously, “The exchange rate of N761/$ at the parallel market is what we are battling with because that is where most marketers source their dollars. NNPC’s ex-depot price is not realistic for other marketers because they (NNPC) source their dollar cheaper, which is at the N461/$ CBN rate.”

Call For Equal Access To Forex And Fair Competition

Marketers argue that if NNPC continues to enjoy cheaper forex access than other marketers, it would not be fair to private dealers and that all should access the dollar at the same rate.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) announced that it would no longer fix petrol prices or release price templates, leaving it to the marketers instead.

The NNPC is importing and has not given people the opportunity to join them in importing. So there is no competition. In a deregulated regime, there must be competition,” insisted an IPMAN official.

Despite the deregulation of petrol prices marketers still face the challenge of sourcing dollars for importation.

They are urging that the advantages NNPC has, such as access to crude for forex generation, should be shared with other major importers of petroleum products.

Members of the Major Oil Marketers Association of Nigeria (MOMAN) agree with this, saying access to dollars remains a problem.

The immediate past chairman of MOMAN, Mr Adetunji Oyebanji, stated, “The truth is that we would come back to the market if we have access to foreign exchange at the same rate the NNPC has.”

The NMDPRA explained that it would no longer fix prices or release templates for petrol. Its Chief Executive, Farouk Ahmed, clarified that in a deregulated market, market forces are allowed to dictate prices.

He reassured that NMDPRA and the Federal Competition and Consumer Protection Commission would ensure aggressive monitoring of activities in the downstream sector to prevent profiteering by petroleum marketers.

Ahmed added that marketers can source their forex from anywhere to import petroleum products.

The Central Bank of Nigeria (CBN) will not provide dollars as it is an open market.

However, Ahmed also cautioned against expecting cheap petroleum products, stating that while the upcoming Dangote Refinery would provide easy access to petroleum products and increase employment, it will still be buying crude oil at international prices.