On Tuesday in Lagos, several stakeholders in the oil and gas industry defended the recent increase in petrol prices, arguing that the hike is necessary to alleviate the financial burden of fuel subsidies on both the Federal Government and the Nigerian National Petroleum Company Ltd. (NNPCL).
The controversy surrounding the price increase arose after NNPCL announced that petrol prices would rise to N855 per litre. Private operators are expected to pay an ex-depot price of N950 per litre, with retail prices at private filling stations potentially exceeding N1,000 per litre once dealer margins, transportation costs, and union fees are factored in. This marks a significant jump from previous prices, which were around N585 to N619 per litre at major stations.
The price adjustment is partly aimed at encouraging Dangote Refinery, which began petrol production on Tuesday, to enter the market. According to industry sources, with a landing cost of N1,118 per litre, NNPCL could no longer afford to sell fuel below this cost without incurring losses. However, NNPCL’s decision was reportedly made without prior consultation with marketers, which has contributed to the current uproar.
Mr. Henry Adigun, an oil and gas consultant, defended the increase, stating that while the price hike is a step toward addressing the subsidy issue, it does not fully resolve the need for total deregulation of the downstream petroleum sector. Adigun emphasized that unless market prices align with international product prices, NNPCL will continue to be the primary importer. He welcomed Dangote Refinery’s entry into the market but noted that its impact would depend on favorable market conditions and efficient collaboration with marketers.
Mr. Ukadike Chinedu, National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), expressed concerns about the lack of official communication from NNPCL regarding the price increase. He urged for clear directives and expressed hope that Dangote Refinery’s involvement would enhance petrol availability and address supply issues. Chinedu advocated for allowing marketers to source products from Dangote Refinery to foster competition and improve market dynamics.
Dr. Ayodele Oni, Partner at Bloomfield Law Practice, described the price increase as unfortunate but reflective of market realities. Oni questioned whether the new price adequately covers all associated costs and provides a sufficient margin. He pointed out that while the Petroleum Industry Act (PIA) encourages market-driven pricing, significant price reductions are unlikely in the short term. The need for a balanced approach that addresses both availability and cost remains crucial.
