Last month the National Bureau of Statistics (NBS) released the latest report in its premium motor spirit (PMS) price watch series. It shows the average monthly price for PMS (petrol/gasoline) paid by households across the country. In August this averaged N196.5/litre (l) for the 36 states of the federation and the FCT, and so above the fixed upper price limit for the retail pump price of N145/l set by the FGN.
The average price of gasoline in August represented a -4.9% m/m decrease. However, when compared with the corresponding period in 2015, it surged by 30% y/y. Nassarawa had the highest price (N209/l).
The August inflation report showed that transportation prices rose by 18.0% y/y, primarily driven by higher fuel prices. Additionally, the maintenance cost for vehicles has risen due to the hike in price of imported spare parts largely driven by fx sourcing challenges.
On a slightly positive note, this year the major oil marketers have recorded significant gains because they enjoy better access to fx for product importation than independent marketers. However, the product remains expensive due to the steady depreciation of the naira.
The current interbank and parallel market rates are 13% and 70% weaker respectively than the PPPRA’s fx assumption of N285/US$. This has placed significant pressure on the pump price range of N138-N145 per litre.
Demand from the depots has dropped considerably. A further increase in pump prices could see a sharper drop in demand. This is a counter argument to the fiscal and other benefits of the removal of subsidies. Our hunch is that the authorities are reluctant to sanction another pump price increase.
