Nigeria raised the price cap for gasoline 67 percent as President Muhammadu Buhari’s administration moved to tackle months of fuel shortages in the OPEC-member country.
Gasoline will now sell for not more than 145 naira ($0.73) per liter in the country of about 170 million from the previous limit of 87 naira per liter, Petroleum Resources Minister of State Emmanuel Kachikwu said Wednesday in an e-mailed statement. Any Nigerian “entity” is now free to import fuel and sell subject to meeting regulatory requirements.
“We expect that this new policy will lead to improved supply and competition and eventually drive down pump prices,” Kachikwu said.
Nigeria, a major crude exporter, relies on fuel imports to meet more than 70 percent of its domestic needs with four state-owned, ill-maintained refineries working at a fraction of their combined 445,000 barrels per day capacity. Higher fuel prices are expected to encourage private investments in refineries and boost domestic supply, the petroleum ministry said.
Buhari, who took office last year, had previously argued that removing a cap on pump prices would hurt Nigerians. With the government unable to meet the foreign exchange needs of importers at a time where low oil prices had eroded export income, fuel shortages have persisted for months, forcing motorists to pay more than double the official price.
While a government quarterly import quota may cease and retailers will be allowed to import gasoline, the “real game changer” will be the return of many independent marketers, who had stayed away from the market, said Uwadiae Osadiaye, an analyst at Lagos-based FBNQuest.
With importers now allowed to use unofficial channels to obtain foreign currency, the black, or parallel, market naira rate may weaken, he said in an e-mailed note on Thursday. The official rate has been pegged at 197-199 per dollar since March 2015. The black-market exchange rate, which most businesses have been forced to use, is roughly 320 per dollar.
“We expect increased pressure on parallel market rates to be a major fallout of this decision,” Osadiaye said.
Former President Goodluck Jonathan, Buhari’s predecessor, sparked a week of strikes and protests when he raised the price of fuel in January 2012, forcing him to partially reinstate subsidies.
The World Bank and the International Monetary Fund had in the past urged Nigeria to end the fuel subsidies, saying they were not benefiting the poor and were no longer affordable.