The price of Premium Motor Spirit (PMS), commonly known as petrol, in Nigeria is anticipated to experience a decline if global crude oil prices continue to fall. This projection is further supported by the relative stability of the naira against the dollar in the foreign exchange market. Analysts believe that this combination of factors could lead to a reduction in the cost of petrol in the coming weeks.
According to a report by The PUNCH, the reduction in oil prices has been linked to a two percent decrease in global crude prices, reaching a 12-week low. This drop is attributed to recent decisions by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, which announced plans to increase oil output starting in April.
As of this week, Brent crude futures fell by $1.19, or 1.6 percent, to settle at $71.62 per barrel. Similarly, West Texas Intermediate (WTI) crude dropped by $1.39, or two percent, bringing it to $68.37. According to Reuters, these are the lowest closing prices for both Brent and WTI since December 6 and December 9 of last year, respectively.
OPEC+’s decision to proceed with an increase in oil output in April has been a significant factor in the recent decline in oil prices. The global oil cartel’s strategy aims to balance supply and demand while maintaining stable pricing. However, the effects of this decision have been felt immediately, as oil prices have shown a noticeable drop.
In Nigeria, players in the downstream oil sector have stated that both the price of crude oil and the exchange rate of the naira against the dollar are major determinants of the cost of refined petroleum products. As these two factors fluctuate, so too does the price of petrol.
In response to the falling prices of crude oil, the Dangote refinery recently reduced its ex-depot price of PMS from N890 per litre to N825. This price cut, which occurred last week, has sparked what many industry observers describe as a price war among oil marketers. The Nigerian National Petroleum Company Limited (NNPCL) followed suit by matching Dangote’s new price, leading to further reductions in the market.
This competitive pricing strategy has caused several petrol marketers to adjust their prices. For instance, the MRS Group lowered its petrol price to N925 per litre, while the NNPCL’s new price was set at N860 per litre. The wave of price reductions has led to questions about the sustainability of such trends in the long term.
Economist Paul Alaje, in an interview with Channels Television, suggested that the reduction in petrol prices is indeed sustainable, given the current market dynamics. He stated that with the right conditions, including a stable exchange rate and lower crude oil prices, petrol prices could potentially fall below N700 per litre.
Alaje explained that the key challenge, however, would arise if a global crisis causes crude oil prices to surge again. “If the price of crude oil goes up due to any global crisis, we are going to see the difference,” Alaje said. “But for now, we are seeing relative stability in the market, and as of today, our computation reveals that PMS should be around N795 to N820 per litre.”
The economist further emphasized that the current realities of the exchange rate and crude oil prices made it possible for Nigeria to sustain the lower petrol prices. He pointed out that Nigeria’s domestic market is significantly influenced by international factors, but for now, the economic indicators are favorable for consumers.
On the other hand, Billy Gillis-Harry, the National President of the Petroleum Products Retail Outlet Owners Association of Nigeria, warned that the price of petrol will continue to fluctuate. He noted that these fluctuations will largely be driven by changes in the foreign exchange market and international crude oil prices.
“The price of petrol will remain volatile. It will fluctuate based on the exchange rates and global crude oil price movements,” Gillis-Harry explained. “Retailers and consumers alike must be prepared for this unpredictability, as the market is highly sensitive to external factors.”
