Petrol Price Hike: Industry Faces Increased Loan Requests
By Emeka Anaeto, Udeme Akpan, Victor Ahiuma-Young & Obas Esiedesa
Increased Funding for Petrol Imports: A Shift in Banking Strategy
As Nigeria’s petrol importation landscape undergoes a dramatic shift, banks are poised to provide up to N3.5 trillion in loans for the importation of petroleum products. The move comes as more marketers seek funding for fuel imports, even as local production is set to be bolstered by the launch of the Dangote Refinery.
Industry insiders reveal that the surge in loan requests signals a changing market dynamic. According to a senior executive in the oil and gas sector at a tier-1 bank, one major loan request of N250 billion came across his desk last week—marking the third such request in a month. The banking sector, which had been hesitant to fund petroleum imports due to past losses on oil-related loans, is now reconsidering its position, with some analysts predicting total lending for petrol imports could reach N3.5 trillion by the year’s end.
Banks’ Cautious Approach: Shift in Risk Assessment
The executive noted that while banks were traditionally wary of lending to petrol marketers, due to the regulatory uncertainties and the impact of price controls, the recent deregulation efforts have made the sector more attractive. “We are seeing more requests for import financing, which was uncommon even after the government’s announcement to end the subsidy regime,” he said. “Deregulation is gaining momentum, and this has altered our risk profile for the sector.”
NLC Accuses Marketers of Overpricing Petrol
Amidst the rising importation loans and increasing petrol prices, the Nigeria Labour Congress (NLC) has raised alarms over the high cost of petrol, alleging that marketers are profiteering at the expense of the Nigerian public. The NLC, in a communiqué issued after its National Executive Council (NEC) meeting in Port Harcourt, called out what it described as a “gang-up” between industry players to inflate prices.
Joe Ajaero, President of the NLC, expressed dismay over the current price of Premium Motor Spirit (PMS), claiming that petrol is being sold far above the actual market price. According to the NLC, the gap between the true cost of petrol and the selling price is a result of inflated margins and unnecessary cost padding, including import charges and port fees, despite the looming possibility of local refineries like Dangote’s coming online.
“How can marketers continue to import petrol when Nigeria has a local refining capacity on the horizon?” Ajaero questioned, citing the additional taxes, freight charges, and port-related fees that make the local cost of fuel unreasonably high.
Experts Call for Price Adjustment, Support for Domestic Refineries
Supporting the NLC’s stance, energy experts argue that Nigeria is paying more for petrol than it should. They point out that at the current global price of $72 per barrel of crude oil, petrol prices in Nigeria should be significantly lower. The price of N1,025 per litre in Lagos, they note, was set when crude oil prices were above $80 per barrel in September 2024, but this price has not reflected the recent drop in global oil prices.
The experts suggest that the disconnect between global crude prices and domestic fuel prices could be partly due to monopolistic practices within the Nigerian oil sector. They call for urgent repairs and the reactivation of domestic refineries in Port Harcourt, Warri, and Kaduna to reduce Nigeria’s dependency on imported petrol and to lower the cost of fuel for consumers.
The Road Ahead: Deregulation or Monopoly?
As the country’s fuel importation financing reaches new heights and domestic fuel production remains on the horizon, the battle between local refining potential and imported fuel remains at the heart of Nigeria’s energy debate. While banks are increasingly willing to fund petrol imports, critics warn that without meaningful reforms in the domestic refining sector, Nigerians will continue to bear the brunt of high petrol prices and importation-related costs.
