Oil Price Falls, Put Nigeria’s Fuel Cost Above N300 Per Litre

Crude oil price opened trading on Monday at a loss, falling -0.72%, but it level is still a problem to the Nigerian government, which has been unable to profit from the 52% surge year-to-date, compared to other members of the Organisation of the Petroleum Exporting Countries (OPEC).

The decline in oil price occurred in the early hours, depreciating marginally to $120.08 per barrel, in contrast to the $120.96 the commodity sold for during the close of business on Friday.

Despite the fall, the level of the price is still high, compared to pre-COVID year, when it sold for $66.87 per barrel. And in order to tame to skyrocketing price, countries, including United States and members of OPEC have moved to pump more oil.

While the hike in oil cost has increased the gains of oil producing countries, it has been an heavy financial burden on Nigeria, as African nation is unable to milk the rising price due to failure in talks with labour to raise fuel price at retail stations.

The current pump price is between the range of ₦162-₦165 per litre, based on crude oil price around $40 per barrel. However, with the global price now above $100, fuel cost should be above ₦315 per litre.

But with the Nigerian Labour Congress (NLC) blocking the proposed hike until Nigerian government repairs or build a refinery to prevent import of refined oil, the Federal Government has been bearing the about ₦150 per litre cost difference through subsidy.

The refusal to remove fuel subsidy and raise fuel price will cost Nigeria ₦6 trillion in 2022, according to the International Monetary Fund (IMF). And with the embargo placed on Rusaian oil, the peak for crude price is still far from its current level.

Considering OPEC agreed to raise Nigeria’s production quota from the 1.5 million barrels per day (bpd), to 1.8 million bpd, the cost burden on the Nigerian government is expected to eat into the gains of the hike in crude oil price.