Oil marketers in Nigeria have shed light on the reason behind the steep rise in fuel prices across the country while making a fresh demand from the government of President Bola Ahmed Tinubu.
The marketers have pointed to the devaluation of the naira as the main factor driving the high cost of petrol, rather than the removal of the fuel subsidy.
It can be recalled that since President Tinubu took office in 2023, the removal of the fuel subsidy has led to a significant jump in fuel prices, with the cost of petrol rising from around N195 per litre to over N800 per litre in some areas.
The government said its decision to end the subsidy is to reduce the financial burden of the subsidy on the national budget. However, the fuel price surge has caused widespread pain among citizens.
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), through its President, Festus Osifo, has explained that the devaluation of the naira, following the decision to float the currency, is the main cause of the continuous rise in fuel prices.
According to Osifo, the fluctuating exchange rate has had a great impact on the cost of importing fuel, leading to higher prices at the pump.
“The real issue is the devaluation of the naira,” Osifo said. “If the naira had been pegged at around N450 to the US dollar, the price of petrol would have been much lower, even after removing the subsidy. For example, if the exchange rate had remained at N450, the cost of petrol could have been below N400 per litre.”
He further explained that in May 2023, the official exchange rate was N450 per dollar, but with the current rate fluctuating between N700 and N1600, the cost of importing fuel has skyrocketed. This has led to increased revenues for government agencies such as the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service but at the cost of higher petrol prices for ordinary Nigerians.
Osifo emphasized that it is not the removal of the subsidy itself that has caused the steep rise in fuel prices but the sharp devaluation of the naira. He urged the government to take immediate steps to manage the exchange rate more strategically, suggesting that if the rate were frozen at N700 for oil distributors, the price of petrol would not be as high as it is now.
