There are strong indications that another increase in the pump price of petrol is on the horizon, marking the third hike within a span of 10 weeks. Oil marketers are suggesting that the landing cost of petrol has surged by 37.4% month-on-month, reaching N632.17 per litre in July 2023 from N460 per litre in June 2023.

It's worth noting that this landing cost does not account for additional expenses such as depot-related charges, transportation logistics, and marketers' margin. When combined, these factors could drive the delivery cost at filling stations to nearly N700 per litre.

Insiders in the oil industry have revealed that the landing cost for August is expected to escalate even further due to exacerbating factors that contributed to the rise in July. Foreign exchange remains a primary concern, with persistent scarcity and a deteriorating exchange rate. The Nigerian Naira has depreciated by about 6.5% in the official market and 25% in the parallel market since the last fuel price increase.

The cost of importing fuel is also climbing in response to the recent surge in crude oil prices on the international market. A detailed analysis of a major operator's transactions showed that the direct cost for marketers was at N604.14 per litre. This includes various components like product cost, freight, port charges, levies, storage costs, insurance, and finance costs.

In the specific case of importing 28,000 metric tons of petrol, the total cost surpassed $25 million, resulting in a sales revenue of over N22 billion but indicating a loss of more than N1.6 billion.

Given this situation, marketers argue that it's not profitable to import at the current pump price, especially with the government not ensuring a free float of pump prices. As a result, the Nigerian National Petroleum Company Limited (NNPCL) has become the primary importer, with only minor private importations recently.

The scenario is exacerbated by declining crude oil output in Nigeria, which threatens the country's capacity to import refined products. According to the Organization of the Petroleum Exporting Countries (OPEC) August 2023 Monthly Oil Market Report, Nigeria's oil production dropped by 6.5% year-on-year to 1.26 million barrels per day in July 2023.

In response to these challenges, experts and industry insiders have weighed in. The National Operations Controller of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Mike Osatuyi, highlighted the positive aspect of high crude oil prices for the government's revenue but acknowledged that Nigerians would bear the brunt of higher fuel prices due to deregulation.

The Managing Director of a major operator expressed concern about the instability and volatility in the downstream sector, which not only discourages importation but also hinders necessary investment in a deregulated market. The MD called for President Bola Tinubu's intervention to manage foreign exchange and stabilize the downstream sector.

Market intelligence from Argus, a UK-based entity, suggests that the situation could deteriorate further, pressuring local and international dealers to adjust prices. Nigerian crude values have risen due to steady demand from Europe, with high crude prices and Naira depreciation impeding the effectiveness of deregulation and active participation by more marketers. Argus encourages importers to scrutinize pricing terms from their suppliers for transparency and fairness.

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