By Adedapo Adesanya
Nigerians may contend with paying more for petrol at the pump as Brent crude, the international crude benchmark that the country prices its crude against, hit $94 per barrel on Friday.
At the moment, consumers cough out between N568 and N617 per litre for petrol in the country. The last price review was in July when crude oil was about $75 to $80 per barrel.
The boost in oil prices was spurred by the growing imbalance between demand and supply as the Organisation of the Petroleum Countries and its allies (OPEC+) restricts daily production. Also, China’s latest industrial output report showed faster-than-expected growth in August.
The main reason for the price jump, however, remains the production cut coordinated by Saudi Arabia and Russia.
The International Energy Agency (IEA) in its latest monthly report, warned that cuts would tip the oil market into a deeper imbalance in the fourth quarter.
Also, the IEA has warned that OPEC+ production cuts have set the stage for volatility to surge due to the draining of global oil inventories and the building of spare capacity amongst OPEC members, including Nigeria.
For Nigeria, the rise in prices means the average Nigerian will pay more to buy petrol at the retail stations for domestic and commercial use, as the landing cost increases whenever there is a rise in crude oil price.
Following the removal of fuel subsidies by President Bola Tinubu in late May, the price of oil is at the mercy of market forces. Although the country has been able to keep a lid on increasing prices in recent months, this latest development could force an uptick in price review.
Any increase in the pump price could create a ripple effect on other basic needs like food, energy, and transportation, which are critical to the economy.
Despite being Africa’s largest crude producer, oil theft and moribund refineries, coupled with infrastructural underdevelopment, make Nigeria one of the most import-dependent countries in the world.
Nigeria’s former Minister of State for Petroleum Resources, Mr Timipre Sylva, during the tenure of erstwhile President Muhammadu Buhari’s administration, expressed fears about the impact of high oil prices on the economy.
He maintained that Nigeria’s comfort zone in terms of oil prices was between $70 and $80 per barrel.
“I’m hopeful the prices will move around, maybe $80, maybe $70. We are hoping it will come down to somewhere around $70 to $80, which will be sustainable for us by the end of the year,” he said last year.
Prices moving closer to $100 per barrel than the safe levels could stoke inflationary fears, which will further hamper Nigeria’s economy, already putting pressure on the citizens.
Modupe Gbadeyanka