Market News

NIGERIANS are seeking relief from high transport costs and rising prices from both the federal and state governments as global oil price shocks push up pump prices across the country.

Despite a naira-for-crude swap between Dangote Refinery and some modular refineries with the Federal Government, Nigerians have to bear the brunt of volatile global oil shocks through intermittent price increases.

In recent weeks, global crude oil prices surged from about $65 per barrel to over $100 per barrel, representing an increase of more than 50 per cent within weeks.

Accordingly, the petroleum retail oil outlets across the country have been increasing prices, citing the global rise in oil prices, which was occasioned by the United States-Iran conflict.

“The Naira-for-crude doesn’t mean that you’re insulated from global market shocks. The crude oil producers value their crude oil in dollars. So, the swap rarely has an impact on the price as the market is already deregulated and influenced by global market prices,” a professor of Energy Economics, Adeola Adenikinju, told The ICIR.

He stressed that Nigeria had not been able to meet all the crude oil demand of Dangote, which means it pushes the firm to import and exposed to price volatility.

He added, “The relief and cushion are not going to come from Dangote, but how the government seeks to ameliorate the pains on the people through various kinds of interventions.”

He suggested that the government could engage the stakeholders and see how best to ameliorate the pains of transportation and energy prices while working with transportation unions.

He further said that the Petroleum Industry Act (PIA) liberalised the sector, noting that any intervention on pricing would amount to subsidy payment.

“A strategic oil reserve could have helped keep prices stable to some extent. However, the federal government did some forward sales of crude in the past, which is also affecting the government’s interventions,” he stressed.

With the rising cost of transport logistics and the general cost of living across the country, the Nigerian Labour Congress (NLC) has lent its voice and asked the federal and state governments to urgently grant wage awards and cost-of-living allowance to cushion inflation concerns.

“The Nigeria Labour Congress subsequently demands an immediate Wage Award and Cost of Living Allowance (COLA) for all workers to cushion the high cost of living. An expansion and overhaul of cash transfers to ensure transparency and that they reach the most vulnerable, with increased value to match inflation,” the President of NLC, Joe Ajaero, said in a statement issued on Sunday, March 15.

The ICIR reports that petrol currently sells for an average of N1,300 in Nigeria’s Federal Capital Territory and N1,500 in some states in southeastern part of the country.

Most Nigerians have to bear the brunt of the spontaneous transport fare price increase across the country, caused by global oil price shocks.

At a time when petrol market in Nigeria is increasingly reliant on domestic refining, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) said that Dangote refinery dominated the market in February, with nearly 93 per cent share of average daily petrol supply, while importers account for just over seven per cent.

Domestic refining which could have seen the price go down failed to achieve this as transport and logistics costs have gone up in response to global market shocks.

“Crude oil feedstocks for refineries are priced using international benchmark prices and denominated in United States dollars, irrespective of the location of the refinery. Consequently, domestic refineries in Nigeria procure crude oil at prices that reflect prevailing global market conditions,” the former director general of the Lagos Chamber of Commerce and Industry (LCCI), Musa Yusuf, told The ICIR.

Already, businesses are contending with multiple macroeconomic pressures, including high inflation, elevated interest rates and weak consumer purchasing power.

He suggested relief supports and tax incentives for small-scale businesses to enable them to scale through the price volatility.

“A more reliable electricity supply would significantly reduce the heavy dependence of businesses on diesel and petrol generators, which currently constitute a major component of operating costs. Improving power sector performance would, therefore, lower production costs across the economy, enhance business competitiveness, and provide much-needed relief for small and medium enterprises, “he added.