By Safiya Stephanie Musa
The fuel (petrol) price in Nigeria is significantly influenced by the cost of importing refined petroleum products. Since a substantial portion of our fuel consumption relies on imports, changes in international oil prices and exchange rates directly impact the cost of these imports. Besides the actual purchase price from international suppliers, expenses such as shipping, handling, and insurance also contribute to the overall cost.
As a result, fluctuations in global oil prices and currency exchange rates can lead to variations in the cost of importing, which ultimately affects the final retail price of fuel in Nigeria. The removal of fuel subsidy means that fuel prices are now determined by market forces. Additionally, factors like crude oil costs, refining expenses, distribution, and taxes play a significant role in determining fuel prices in the country.
It’s important to acknowledge that the removal of fuel subsidy positively impacts government revenue, particularly from crude oil proceeds, resulting in increased allocations shared among the Federal, State, and Local Governments. Proper utilization of these funds is crucial to avoid misappropriation and ensure they are optimally allocated to offset the adverse effects of high fuel prices and other economic challenges.
State and Local Governments also bear a significant responsibility in mitigating the negative impacts of soaring fuel prices, utilizing their increased allocation from the Federal Government effectively. By implementing well-thought-out policies and projects, they can alleviate the burden on citizens and contribute to a more stable and prosperous economic environment.
Safiya Stephanie Musa is an Economist and a Policy Analyst