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By Chukwuma Umeorah
The national president of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, has stated that the price of premium motor spirit (PMS) could drop to between N500 and N600 per litre if the naira strengthens against the dollar.
Speaking at the association’s National Executive Council (NEC) meeting in Lagos recently, Osifo emphasised the critical role of exchange rate management in determining the cost of fuel.
“The price of PMS is directly linked to our weak naira. If the exchange rate improves to below N1,000 to a dollar, PMS could sell for as low as N500 per litre. In the same way, we would buy AGO (diesel) and other petroleum products for lower than what they currently sell.
“The price of PMS is high today because the exchange rate is high. This is what has affected the high cost of almost everything in the country today,” Osifo noted.
The PENGASSAN president attributed much of the high cost of fuel in Nigeria to exchange rate fluctuations.
He further explained that the global crude oil market operates primarily in U.S. dollars, from equipment purchases to expatriate salaries.
“A weak naira means higher costs for everything, including PMS,” he said, adding that stabilising the exchange rate was crucial for mitigating fuel price hikes.
He also clarified the factors that led to the drop in fuel prices during the final month of 2024 when PMS sold for less than N900 per litre in some filling stations nationwide. According to him, international crude oil prices fell within that period, and the naira saw a slight appreciation.
“Towards the end of last year, the price of crude came down from about $83 per barrel to around $70. Also, the exchange rate in NAFEX dropped to about N1,500 as against N1,600, gaining about N100. These were the factors that led to the reduced price of fuel in December.”
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Osifo, however, warned that as long as the naira trades above N1,500 to the dollar, fuel prices could continue to rise, irrespective of crude oil production improvements or refinery operations.
He stressed that the current situation is vastly different from the era before the unification of exchange rates, which saw a relatively stronger naira and lower fuel prices.
Despite these challenges, Osifo expressed optimism, citing the ongoing revitalization of domestic refineries as a potential stabilizing factor for PMS prices.
He stated that the Port Harcourt refinery is now operational, while significant progress has been made on the Kaduna refinery.
“Although exchange rates remain high, the revival of the Port Harcourt and Kaduna refineries may bring some level of stability and sufficiency in fuel supply across the nation. However, the fact that we are producing locally does not guarantee that the price would be below the cost of production. Even farmers calculate their production costs before adding profit margins,” Osifo emphasised.
Addressing misconceptions about local refining, Osifo explained that domestic production alone would not immediately translate to lower prices.
“Producing locally does not mean selling below cost. Every producer factors in production expenses and profit margins,” he said, clarifying further that the refining process involves multiple stages, including blending operations, to produce high-quality PMS.
Osifo also expressed hope that Nigeria’s exchange rate challenges could be managed with improved policies and fiscal discipline, emphasising the need for strategic government action to stabilise the naira.
“The solution lies in better exchange rate management and leveraging our resources for economic growth,” he concluded.
He reiterated that PENGASSAN would continue to play its advocacy role in ensuring the growth and efficiency of Nigeria’s oil and gas sector while contributing to the broader economy.
