Nigeria may soon witness a sharp increase in fuel prices, with projections suggesting prices could rise to around N1,200 per liter from the current N897 to N900, according to Managing Director/Chief Executive Officer of Financial Derivatives Company Limited and renowned economist, Rewane Bismark.
This anticipated hike comes on the back of surging global oil prices, driven by geopolitical tensions in the Middle East.
While higher oil prices typically benefit oil-exporting nations like Nigeria, the domestic situation tells a more complex story.
Global Brent crude oil recently surged to $75 per barrel, a development Rewane described as “good for Nigeria in terms of earnings.”
However, he also pointed out that Nigeria’s oil production remains “below expectation,” preventing the country from fully capitalising on the revenue potential of these global market shifts.
Rewane noted that while the crisis in the Middle East, particularly in Lebanon, is a key driver behind the oil price increase, this situation is temporary and will likely be resolved.
“The crisis in the Middle East is a transcendent event. I think finally you will have a truce, but meanwhile, the price of Brent has gone up to $75 a barrel,” he stated.
The Domestic Impact of Rising Oil Prices
One of the major ripple effects of rising global oil prices has been the strengthening of the Naira in parallel markets.
The currency, which had depreciated significantly in recent months, has appreciated to around N1,687.
Rewane observed that “the rates are virtually unified at about N1,687 right now. Don’t forget it had got all the way to 1720,” reflecting a significant improvement.
He also highlighted that the Naira had climbed in various sectors, including the International Air Transport Association (IATA) market for airline tickets, where it appreciated to about N1,689.
Fuel Prices and the Cost of Living
Diesel prices, on the other hand, have been steadily climbing, reaching N1,200 per liter. This rising diesel cost, Rewane argued, could soon push the price of Premium Motor Spirit (PMS), or petrol, in the same direction.
“PMS, meanwhile, is trading at about N897 to N900 a liter. We expect it to increase to about N1,200 soon,” the economist warned.
For a country still grappling with inflation and high living costs, this potential fuel price hike is a significant concern.
The increase, he emphasised, will likely affect transportation costs, which in turn will have a cascading effect on the prices of goods and services, placing further strain on households and businesses already stretched thin.
Global Forces and Local Realities
While Nigeria stands to gain from higher oil prices in terms of foreign earnings, the benefits are limited by lower-than-expected production and an internal market struggling with fluctuating fuel prices and currency volatility.
As the global community watches the unfolding crisis in the Middle East, Nigeria braces for the domestic impact of these external shocks.
“We need to separate things that are exogenous and temporary from things that are fundamental,” Rewane concluded, underscoring the complexity of navigating these turbulent times.
This piece was contributed by Affiong Bassey
