Nigerians’ hopes of some relief from the cost of living crisis in the country have been dashed as petrol from the newly launched Dangote Refinery is being sold at prices higher than expected, as the Nigerian National Petroleum Company Limited (NNPC) fixed new estimated petrol pump prices across all states.
The NNPC said that after completing the loading of Premium Motor Spirit, popularly known as petrol, from the Dangote refinery, petrol prices for September 2024 would range from approximately N950 to over N1,000 per litre, depending on the region.
Recall that NNPC stated it paid N898 per litre for the 16.8 million litres of petrol purchased from the Dangote refinery on Sunday, September 15.
A breakdown of the pricing showed that Borno State will pay N1,019.22 per litre; Sokoto State – N999.22 per litre; Kano State – N999.22 per litre; Kaduna State – N999.22 per litre; Federal Capital Territory (FCT) – N992.22 per litre; Rivers State – N980.22 per litre Oyo State – N960.22 per litre; and Lagos State – N950.22 per litre.
NNPC explained that the new prices for September are based on figures obtained from the Dangote refinery and not set by the federal government.
RELATED: NNPCL, Dangote Disagree Over Price Of Petrol
The company’s spokesman, Olufemi Soneye, in a statement on Monday, said these prices are for September 2024.
The NNPC also stressed that the petrol loaded from the Dangote Refinery was priced in dollars as the Naira sale of petrol will commence in October.
Initially, there were hopes that local production would significantly lower fuel costs, thus lowering the cost of transportation, and prices of food items.
According to the NNPC, it purchased petrol from the Dangote Refinery at N898 per litre, while distribution costs and regulatory fees contributed to the final retail prices. The company emphasised that these prices are determined by market forces, as mandated by the Petroleum Industry Act (PIA), rather than government regulation.
To this end, other petroleum products marketers are expected to sell higher as they adjust to the new price regime as announced by NNPC.
The executive secretary of the Major Energy Marketers Association of Nigeria(MEMAN), Clement Isong, while reacting to the situation when LEADERSHIP put a call across to him yesterday said, he is not aware of the adjustment but will get the clearer picture and revert to our Correspondent.
The price hike caught many off guard, especially as it came shortly after the refinery’s launch. NNPC’s pricing reflects a significant increase from previous rates, with petrol prices rising from N568 to N896 per litre on the same day. This has led to calls for transparency regarding the refinery’s pricing structure and production costs, with some stakeholders questioning why locally produced petrol is not cheaper than imported alternatives.
The situation has sparked debates about market dynamics and regulatory practices in Nigeria’s petroleum sector, with many citizens feeling that the anticipated relief from high fuel prices has not materialised.
Many Nigerians are understandably shocked that petrol being pumped out of the Dangote refinery will not be selling at a relatively affordable price at the pumps, or a little cheaper than the imported variety.
Long conditioned to subsidised products, Nigerians had expected that locally produced petrol would offer a huge relief from the cost-of-living crisis currently in the country.
Hope was heightened when the government announced recently that Dangote will buy Nigerian crude oil in Naira and sell his products within the country in the same currency.
In many social media platforms and talk shows, Nigerians have been busy analysing the refinery’s production economics and explaining why we should be buying cheap fuel soon.
The Independent Petroleum Marketers Association of Nigeria expressed concerns over the pricing of petrol from the Dangote Refinery, urging the NNPC to ensure it is not sold at a higher price than imported fuel.
IPMAN argued that such a disparity would be counterproductive to the nation’s drive for energy self-sufficiency and could negatively impact consumers and marketers alike.
According to IPMAN on Monday, the pricing strategy for locally refined petrol should reflect the advantages of domestic production, offering Nigerians a more affordable option.
The association emphasised that maintaining competitive pricing is crucial for the success of the Dangote Refinery and for fostering a sustainable fuel market in the country.
IPMAN national welfare officer John Kekeocha stated this on Channels Television’s The Morning Brief breakfast programme on Monday.
“If NNPC can sell Dangote products higher than the imported products then it doesn’t make sense. What is the celebration we are having all these while then?” he queried.
An energy analyst, Etim Etim, while commending NNPCL for these disclosures, noted that these prices are only obtainable for the month of September when NNPC is buying in dollars from the refinery.
“For October, when crude would be sold in Naira, the prices may change, depending on a few variables like the exchange rate and the crude oil price in the international market.
He said that the downstream market is now fully deregulated, and for the first time in our history, subsidy is truly gone.
He urged Nigerians to brace up for a market-determined pricing structure that would be influenced by a few factors: the price of crude oil, the exchange rate, the cost of refining, overheads, borrowing costs, and insurance.
“Crude oil price will continue to be a major determinant of petrol price. Even when NNPC sells crude in Naira to Dangote, the pump price would still be determined by the prevailing exchange rate. If the naira continues to slide, petrol prices will increase, even if other factors remain unchanged.
He further said, “This morning, crude oil is selling at about $72, and at the exchange rate of N1,600/dollar, Dangote would be buying a barrel of crude oil at about N115,200. Although there are many other products that are obtained from a barrel of crude oil, petrol will not come cheap because of other inherent costs in the production process.
“Dangote is highly indebted to Nigerian banks, and even before his refinery began production, he was already repaying and servicing his debts.
“He had told the media in July that he had incurred huge interest charges due to failed attempts at land acquisition in Ogun State and delays in construction in Lagos State due to communal issues. The accumulated interest charges and other interest costs will count in the pricing of his gasoline.
Etim noted that Dangote’s production costs must also be very high, which will heavily impact the pricing of its products.
“The refinery provides everything for itself, including building three ports within the complex for its use in bringing in heavy equipment and building a huge 400 MW power plant to provide its own electricity. In addition, DR has over 8,000 people on its payroll. During construction, 29,000 Nigerians and 11,000 expatriates worked at the site. The huge wage bill would have to be taken care of by the selling prices of the products.”
Etim expressed hope that the refinery’s purchase of crude oil in Naira would ameliorate the impact on the exchange rate.
“The only reason petrol will sell cheap is if crude oil goes for as low as $40 per barrel or if the dollar exchanges for N800 or less. Both have significant implications for the economy, of course. But with tension mounting in the Middle East, cheaper crude oil is not likely soon.
“I have taken note of the assurance from the Finance Minister, Wale Edun, that petrol prices will fall as the refinery scales up production.
Speaking at the refinery on Sunday, Edun said, ‘’We’re expecting that as this refinery, and even others, ramp up production scale, and achieve economies of scale, there should be the opportunity—and there is definitely the potential—to reduce their costs, which should be passed on to consumers’’.
Nigerians have taken to social media to express their dismay at the current situation.
One X user queried, ‘’Why would Dangote not sell his petrol cheap or cheaper than imported product when he is not bearing the cost of shipping, LC charges, wharf charges, insurance, and other costs borne by importers?’’
Another person noted on X, ’’Anything above N766 per litre from Dangote is back to square one’’.
One other commentator wrote, ‘’Queuing for fuel is not our problem. If Dangote’s fuel is not cheaper than what we have now, then the whole thing is not worth it’’.
The NNPC began loading the first batch of petrol from the Dangote Refinery on Sunday, saying it got N898 per litre from the private refinery.
Before lifting petrol from the Dangote Refinery on Sunday, NNPC retail outlets in Lagos sold petrol for around N855, but a litre of Dangote petrol now sells for N950 per litre in Lagos and N1,019 in Borno.
However, Dangote Refinery denied selling petrol to the NNPCL at N898. In a statement late Sunday, a spokesman for the refinery, Anthony Chiejina described the claim by the NNPCL as “misleading and mischievous”.
“It should also be noted that we sold the products to NNPCL in dollars with a lot of savings against what they are currently importing. With this action, there will be petrol in every local government area of the country regardless of their remote nature,” Chiejina said.
However, the NNPCL insisted that it got petrol from Dangote Refinery at N898 per litre and challenged the latter to release the price at which it sold petrol.
The NNPCL further released a breakdown of pricing it sells Dangote petrol at its filling stations nationwide.
Last December, Dangote, Africa’s leading industrialist, commenced operations at his $20bn facility in Lagos with 350,000 daily barrels.
The refinery, initially bogged by regulatory battles, hopes to achieve its full capacity of 650,000 barrels per day by the end of the year.