Can Nigeria retain petrol pump price freeze despite oil rally?

Nigeria, Africa's largest oil producer, is feeling the heat as oil marketers hint at a possible increase in the pump price of petrol due to the ongoing global oil rally and the devaluation of the Naira. The situation has prompted discussions on the future of petrol pricing in the country, with concerns raised about the potential return to full-on subsidy if the current trend continues. According to data from the Nigeria Extractive Industries Transparency, total unremitted revenues to the federation by some government agencies and companies in the oil and gas sector surged to $9.85 billion in 2021. This revelation adds another layer of complexity to the economic challenges facing Nigeria, where the management of oil revenues has always been a critical issue. Ayodele Oni, Partner at Bloomfield Law Practice, spoke on the recent developments in the oil market during an interview on CNBC Africa. He highlighted the precarious situation Nigeria finds itself in and urged the government not to backtrack on the progress made in reforming the subsidy regime. On the topic of the oil market dynamics, Oni expressed concerns about the possibility of a faster climb to $100 per barrel and the implications for oil-dependent countries like Nigeria. The recent production cuts by major oil-producing nations have helped shore up crude oil prices globally, exerting further pressure on oil-importing countries. The weakening Naira against the US dollar has added to the challenges faced by Nigeria, making the importation of petrol more expensive and contributing to the overall cost of living in the country. Oni emphasized the importance of local refining capacity to mitigate these challenges, pointing out that until Nigeria boosts its refining capabilities, it will remain vulnerable to external market forces. Reflecting on the broader economic issues, Oni stressed the need for Nigeria to focus on productivity and value addition in its extractive industries. He lamented the loss of revenue from resources like gold, citing cases of unofficial sales and mismanagement, which further strain the country's foreign exchange position. Drawing a comparison with countries like Japan and South Korea, where a strong US dollar is less of a concern due to robust export industries, Oni underscored the importance of diversification and increasing Nigeria's economic output to reduce vulnerability to currency fluctuations. As Nigeria grapples with the challenges posed by the oil rally and currency devaluation, the path forward remains uncertain. The government faces tough decisions on petrol pricing and economic reforms to navigate the turbulent waters ahead.