FG Plans Negotiations on ₦1,350 Petrol Ceiling Amid Rising Global Oil Prices.

The Federal Government has announced its intention to negotiate a ₦1,350 per litre ceiling on the ex-gantry (landing) cost of petrol as a measure to cushion Nigerian citizens from the huge fluctuation in oil prices, especially as a result of the global increase in crude oil prices.

Finance Minister and Coordinating Minister for the Economy, Taiwo Oyedele stated this while reacting to the surging prices of petroleum products and the call by some groups for the resumption of fuel subsidy at a press briefing in Abuja on Thursday.

How the ceiling will work

The ceiling proposed by the Federal Government will serve as a “temporary” cover for the ex-gantry price of petrol. This means that any increase in price beyond ₦1,350 will be borne by the refiners and importers until there is a decrease in crude oil prices or the exchange rate between the Dollar and Naira improves.

The ceiling will also be reviewed on a monthly basis with details of the figures made public to ensure transparency.

The government, however, clarified that the proposed measure was not a subsidy, but a temporary control measure to help moderate prices.

Government’s position

Oyedele explained that the ceiling was proposed to avoid immediate adjustment of petrol prices in Nigeria according to the fluctuation of crude oil prices or exchange rate of the Dollar.

He explained that although it is difficult to predict global trends, a controlled increase or decrease in petrol prices will cushion the people and make it easier for them to budget effectively. “₦1,400 a litre today and ₦1,400 a litre tomorrow is better than ₦1,500 today and ₦1,300 tomorrow because fluctuation adds to the burden,” he stated.

Background to the announcement

The announcement comes as Nigeria struggles with soaring prices of petroleum products as a result of the war in the Gulf. With the attacks by both the US and Israel on Iran in February, there has been a significant disruption to oil supplies in the region with negative implications for the global market.

The minister explained that the situation in the region had resulted in increased prices of crude oil, freight and refined petroleum products which have affected Nigeria’s domestic prices despite the country’s role as an oil producing nation.

According to Oyedele, Brent crude oil, which is used as a benchmark for global oil prices, was trading above $100 per barrel, compared to about $50 per barrel before the war broke out in the gulf. He also noted that traffic through the strategic Strait of Hormuz was down to about 13 percent of what it was prior to the war, as of mid-September.

Diesel exports from the Middle East and Russia were down 75 percent year-on-year while tanker rates from West Africa were at their peak in September as buyers sought alternative suppliers. Oyedele noted that as a result of the situation in the Gulf, petrol prices in Nigeria had increased from about ₦830 per litre before the war (when a barrel of oil was priced at about $70) to about ₦1,400 per litre on average.

Political implications of the ceiling

The situation with respect to soaring petrol prices has created a lot of political tension in the country as it has triggered calls by some political groups for the resumption of subsidies on petroleum products. The subject has also become a divisive issue in the upcoming 2027 general elections. The government, with the proposed ceiling, is seeking to address the situation by reducing the burden of rising prices of goods and services since increased prices of petrol will lead to increased cost of transportation of all goods and services in Nigeria.

(Source - premium times)