Petrol Price May Hit N1000 Per Litre – Experts Warn

Economists have urged the Federal Government to intervene in the foreign exchange market to prevent the Naira from plunging against the dollar.

This, they believe, is critical to avoid a potential petrol price surge that could reach N1000 per litre.

Speaking with Nigerian Tribune, several experts advised against solely relying on market forces to dictate the Naira’s value.

They noted that Asian nations do not completely submit to market dynamics, suggesting that the Nigerian government adopt a similar stance.

The economists recommended that the government provide petrol importers with special, concessional foreign exchange rates. This move would facilitate the import of cheaper petrol, unaffected by fluctuations in the international market.

Looking ahead, the experts called on the government to refurbish local refineries, enabling domestic petroleum product refinement to satisfy the country’s needs.

In addition, they urged the establishment of modular refineries to supplement any shortfall from regular refineries.

The government was also advised to curb oil theft urgently to fulfil the production quota set by the Organisation of Petroleum Producing Countries (OPEC). This action could enhance the country’s foreign exchange earnings.

Allowing the nation’s exchange rate to be swayed by market uncertainties could be disastrous for the economy, given the lack of substantial export earnings, the economists warned.

The Chief Economist & Partner at SPM Professional, Paul Alaje expressed concern about the potential surge in petrol prices.

He warned that the price of petrol could reach N1000 per litre if the situation remains unchecked, especially with rising crude oil prices and Nigeria’s limited control over them.

Alaje said: “It is true that Nigerians may have to pay up to N1000 per litre because when we say the forces of demand and supply, it is a purely international market that will detect the price. It is not a respecter of what Nigeria is earning or a number of poor people in Nigeria. That is why we should be wary of following purely market forces.

“There is a role government has to play in any economy. And that is what Asian economists have realised and have advocated that there is a limitation to what the classical and neoclassical are teaching the public and those in authority; there is danger in market forces.

“We have, therefore, stated that as much as it is important for us to allow the forces of demand and supply to adjudicate prices, including FX, and PMS, it is therefore, also more important for the government to intervene because of the large number of poor people that we have in our nation today.

“If it (petrol) goes to N1000 per litre, what does it mean? It means that the support the government wants to give to people in terms of ₦8,000 is even insufficient abnitio as the price of PMS will continue to increase. We know that no matter how much the government increases salaries, it cannot be done indefinitely, even the Federal Government’s income cannot double immediately. That is why it is important for us as a people, to be mindful of the theory that we apply and adopt in our system”.

The Managing Director, SD&D Capital Management Limited, Gbolade Idakolo, speaking on the same issue, agreed with the analyst’s assertion that the price of petrol could rise to N1000 per litre if nothing is done to reign in the rising FX rate.

Idakolo said, “The assertions of the analyst might not be far from the truth if the government only relies on private refineries or imported fuel.

“The government needs to speed up the turnaround maintenance of its refineries which will ensure that a large percentage of petroleum products can be refined and sold at a considerably low cost to the people because private refineries would sell at international price in order to maximise profit.

“The government also needs to intervene to stop the free fall of the Naira to the US dollars by injecting more foreign currency into the Importer and Exporter (I & E) window so that it can drive down the exchange rate which has a major impact on the eventual cost of petroleum products”.

A financial analyst, Aliyu llias on his accord said, “It is expected that Nigerians will pay more because two things are the determining factor now. The Naira to dollar is on floating, so anywhere the world moves, we follow them. Another thing is the price of crude oil. If the price of crude oil moves up, instead of Nigeria benefitting, we will pay more for our consumption.

“In the short term, the government should intervene by providing special forex for fuel importers. The main solution is for us to have our refineries working. If we have domestic refining capacity, we will not have to import fuel. We should have modular refineries and revisit the issue of forex”.

Managing Director at Dignity Finance and Investment Limited, Dr Chijioke Ekechukwu, identified two major factors driving the high cost of petroleum products as the international crude oil price, and the exchange rate.

He called on the government to fix the refineries since it cannot influence the oil price.

Dr. Ekechukwu said, “There are two major factors driving the high cost of petroleum products currently. The first is the international crude oil price, and the second factor is the exchange rate.

“We cannot influence the oil price as a country, but we can influence the exchange rate by doing everything within our powers to increase production of oil up to the allowed OPEC quota. We can also reduce oil theft to generate more foreign revenue. That way, the supply of foreign currencies will increase and the exchange rate will be reduced.

“We also need to make our refineries work, both government and privately owned refineries. When they work, we don’t have to import petroleum products at an exchange rate determined prices”.