CEO of Rainoil Ltd, Dr. Gabriel Ogbeche, has asserted that the soaring fuel prices in Nigeria are largely influenced by the exchange rate rather than fluctuations in crude oil prices on the global market.
He made this statement during an interview on Channels Television’s Business Morning program.
Ogbeche noted that the federal government fully deregulated the petroleum industry in October, although some implicit subsidies have persisted following the President’s announcement in May 2023. He emphasized that fuel prices in Nigeria hinge on two primary factors: the price of crude oil and the exchange rate of the Naira against the U.S. dollar.
While crude oil prices have remained relatively stable between $60 and $80 per barrel, Ogbeche highlighted the instability of the exchange rate as a significant concern. “The most important development recently is the full deregulation of the downstream sector,” he said. “For over 20 years, we have been advocating for this change, and finally, the government has made the move.”
He elaborated, “The price of crude oil has been stable, but the biggest issue has been the devaluation of the Naira. This significant depreciation is driving the relatively high petrol prices.”
As of October, petrol prices have surged beyond N1,000 per litre at major retail stations, following the Nigerian National Petroleum Company Limited’s decision to sell crude oil to the Dangote refinery in Naira.
The National Bureau of Statistics reported that the average retail price of Premium Motor Spirit (petrol) reached N1,030.46 in September 2024, marking a 64.55% increase from N626.21 in the same month last year, and a 24.08% rise from N830.46 in August.
President Bola Tinubu’s administration announced an end to fuel subsidies during his inauguration last year, pledging to establish a market-reflective pricing model. Shortly thereafter, the Central Bank of Nigeria (CBN) unified the foreign exchange market, resulting in the Naira losing over 50% of its value.
Given that petroleum products are priced in U.S. dollars, the Naira’s depreciation has directly contributed to rising fuel costs. Currently, the Naira exchanges at approximately N1,600 to $1.
