Fuel Price: Fresh Hike Looms As Landing Cost Rises By 37.4%
There are strong indications that pump price of petrol is expected to record another round of increases, the third within 10 weeks as oil marketers hint that the landing cost of petrol has risen month-on-month, MoM, by 37.4 per cent to N632.17 per litre in July 2023, from N460 per litre in June 2023.
The landing cost excludes other additional costs which includes deport related charges, transportation logistics and marketers’ margin, which would combine to bring delivery at filling stations at nearly N700/litre.
Sources around oil marketers told reporters that the landing cost for August is expected to rise further as the factors that propelled the rise in July figures have worsened as at last week.
Giving further insight, they said foreign exchange has been a major concern where scarcity has persisted while exchange rate has also continued to deteriorate.
As at last weekend Naira had depreciated by about 6.5 percent in the official market and 25 percent in the parallel market since the last pump price raise.
The marketers also noted that cost of fuel import is rising in response to the recent rises in price of crude oil in the international market.
A transactional analysis of a major operator, sighted by our correspondent last weekend showed that marketers were paying N604.14 per litre as total direct cost.
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A breakdown shows product cost per liter at N578.46, freight (Lome-Lagos) at N10.37, port charges at N7.37, NMDPRA levy of N4.47, storage cost at N2.58, Marine insurance cost at N0.47, fendering cost at N0.36 and ”others” at N0.05 as well as a finance cost amounting to N28.04.
Specifically, the transactional analysis put the landing cost of 28,000 metric tons of imported petrol at over $25 million, including total product cost, total direct cost, total finance cost, capable of generating more than N22 billion as sales revenue, indicating a loss of over N1.6 billion.
As a result of this development, the marketers said it would be unprofitable to import at current pump price, while the government has not guaranteed a free float of pump prices.
Consequently, the Nigerian National Petroleum Company Limited, NNPCL, has remained the only importer aside the minor private importation recorded last month.
The situation appears worsening as Nigeria’s crude oil output is now declining threatening the capacity to import refined products.
In its August 2023 Monthly Oil Market Report, MOMR, obtained by Economic Confidential, the Organisation of Petroleum Exporting Countries, OPEC, noted the dwindling output of many nations, adding that Nigeria’s oil production dropped on a year-on-year, YoY, basis by 6.5 per cent to 1.26 million barrels per day, bpd in July 2023, from 1.2 million bpd recorded in the corresponding period of 2022.
It also noted that on a month-on-month, MoM basis, the nation’s output dropped by 3.0 per cent to 1.26 million bpd in July 2023, from 1.3 million bpd in June 2023.
