The rise in crude oil prices by 7.5% to $85.89 per barrel in August 2023, coupled with the depreciation of the naira to N775/dollar in the official market and an inflation rate of 22.79%, has resulted in an increased landing cost of petrol to N600 per liter in the domestic market. This figure, as confirmed by industry analysis obtained by Vanguard, does not even include additional costs such as depot-related charges, transportation, and marketers’ margin, which could further elevate the price to over N700/litre.
The landing cost for September 2023 is expected to rise further due to worsening factors, and this has prompted concerns about the sudden removal of the subsidy on fuel. Funmi Bashorun, the Business Development Manager at Argus, West Africa, pointed out that high crude prices and the continuous depreciation of the naira hinder the effectiveness of deregulation and discourage active participation by more marketers.
While NNPC Limited and major marketers continue to sell petrol at N568 per litre, independent counterparts have set their prices higher, ranging from N570 to N700 per litre, depending on the location.
The removal of subsidy has had repercussions in various sectors. Transport fares have surged by more than 100% on intrastate and interstate routes, placing a heavier financial burden on commuters. Food items have also seen significant price increases, making it difficult for poor families to afford basic necessities. For instance, the price of a 50kg bag of rice rose to N53,000 in August 2023 from N36,000 in July, and a 25-litre container of branded groundnut oil increased to N34,000 from N25,000.
Additionally, the move by Electricity Distribution Companies (DisCos) to increase electricity tariffs could further impact Nigerians and the nation’s economy. The Nigerian Society of Engineers (NSE) has raised concerns about the justifications put forward by DisCos for tariff increases, citing unrealistic figures and insufficient evidence to warrant the proposed adjustments.
The suddenness of subsidy removal has left Nigerians and the economy grappling with the consequences, highlighting the need for careful and strategic economic transitions. President Tinubu has called on the new ministers to work towards improving and stabilizing Nigeria’s economy to positively impact the lives of citizens.