The Rising Cost of Petrol in Nigeria: Understanding the Discrepancy Between Landing and Retail Prices
Nigeria has recently witnessed a significant shift in the cost of landing Premium Motor Spirit (PMS), commonly known as petrol, at its ports. Over the past three months, the landing cost has decreased by 20.34%, dropping to N971.57 per litre.
This reduction might seem promising, suggesting that global market adjustments and supply chain dynamics are beginning to provide some relief. However, despite this drop in the landing cost, the retail price of petrol has instead seen a steep increase, causing confusion and financial strain among consumers.
Data from the Major Energies Marketers Association highlights this pricing disconnect. As of August 2024, oil marketers imported petrol at a landing cost of N1,219 per litre, based on a Brent crude oil price benchmark of $80.72 per barrel and an exchange rate of N1,611 per dollar. Retail prices at this time were set at N617 per litre.
By November, although the estimated landing cost had decreased to N971.57 per litre—benefiting from a slightly lower Brent crude price of $75.57 per barrel and an exchange rate of N1,665.84 per dollar—the retail price soared to N1,060 at the Nigerian National Petroleum Company (NNPC) stations and as high as N1,180 at stations owned by independent marketers.
This disparity between falling landing costs and rising retail prices leaves many questioning what drives this retail inflation.
Experts attribute the situation to various factors, including ongoing deregulation of the fuel market, exchange rate fluctuations, inflationary pressures, and broader economic challenges that the country faces. The discrepancy between the landing and retail costs has raised concerns, especially as citizens bear the brunt of higher living costs with seemingly little relief in sight.
READ ALSO: Why “Arrest Bill Gates” is Trending on X Following Trump’s Election Victory
The data further reveals monthly changes in landing costs, which dropped from N945.63 per litre in September 2024 to N903.64 per litre in October 2024, before settling at the current N971.57.
Yet, instead of these lower landing costs translating into a reduced retail price, Nigerians are now paying much more per litre than they did in previous months. This pricing trajectory has intensified public scrutiny of fuel marketers, who are seen as inflating retail prices in a bid to maximize profit despite decreasing importation costs.
The deregulation of the fuel sector has been a central issue in Nigeria’s petrol pricing landscape. Deregulation essentially shifts pricing controls from the government to market forces, meaning prices are now heavily influenced by supply-demand dynamics and the country’s volatile exchange rates.
The Naira’s devaluation, combined with rising inflation, has aggravated the pricing instability, causing the cost of fuel and other essential goods to spike.
Experts have voiced their anticipation that the lower landing costs should eventually translate into decreased retail prices, although it’s unclear how long it might take for this change to reach consumers at the pump.
With deregulation in play, factors such as competition among marketers and fluctuating currency exchange rates will determine whether these reduced landing costs will ultimately lead to more affordable petrol prices for Nigerians.
The Nigeria Labour Congress (NLC) has been vocal in condemning the price inflation, asserting that petrol marketers are taking advantage of Nigerians by setting retail prices significantly above what should be the actual market value.
Following its National Executive Council meeting, the NLC released a statement accusing marketers of price exploitation, which, according to the organization, has exacerbated the hardships faced by Nigerian citizens. They argue that government policies—especially in the wake of deregulation—are imposing severe economic pressure on the population, pushing many into financial precarity and food insecurity.
The NLC’s stance underscores a broader call for accountability from both fuel marketers and government institutions. By highlighting the disparity between the costs of landing and retail, the NLC aims to advocate for fair practices and press for measures that would ease the financial burden on ordinary Nigerians.
READ ALSO: Asian Markets Slide as China’s Stimulus Package Falls Short of Expectations
While the current reduction in landing costs holds potential for retail price adjustments, the path forward is unclear. Without significant changes to exchange rates, inflation, or policies governing the deregulated fuel market, Nigerians may continue facing high fuel prices.
However, the current scrutiny from labor organizations and market analysts suggests a growing demand for transparency and equitable pricing in the fuel market.
For Nigeria, achieving a balance in fuel pricing that reflects global market shifts without overly burdening its citizens remains a challenging but crucial goal. If left unchecked, the current pricing trends may lead to increased social unrest and further economic strain on Nigeria’s most vulnerable populations.