Billionaire industrialist Aliko Dangote has said his refinery’s ability to sell diesel at significantly discounted prices will provide immediate relief to Nigeria’s inflation woes.
He disclosed this to newsmen on Wednesday after visiting President Bola Tinubu to celebrate Eid-El-Fitr In Lagos.
This is as oil marketers are urging the Dangote Petroleum Refinery to lower its recently introduced diesel price.
The marketers argue that the current price, between N1,225 and N1,300 per litre, is too high considering the refinery’s location within Nigeria and the recent appreciation of the naira.
The Petroleum Products Marketers Associations, are also demanding access to foreign exchange at official rates to help bring down prices of petroleum products being imported into the country.
They said the price of Automotive Gas Oil, AGO, also called diesel, is still on the high side despite being processed locally by Dangote refinery.
Dangote, the chairman of Dangote Group, expressed optimism about the economy noting that the naira exchange rate has improved significantly in recent months, dropping from around 1,900 to the dollar to the current level of 1,250-1,300.
This, he said, is already having a positive impact, with the price of locally-produced goods like flour starting to come down as businesses pay less for diesel fuel.
The billionaire entrepreneur revealed that his own refinery has been selling diesel at 1,200 naira per litre, compared to the previous market price of 1,650-1,700.
He expects this dramatic reduction in fuel costs to help drive down inflation in the coming months.
He said “ but there’s quite a lot of improvement because if you look at it here, one of the major issues that we’ve had was the narrow devaluation that has gone very aggressively up to about 1,900. But right now we’re back to almost 1,250, 1,300, which is a good improvement.
“And you can see quite a lot of things have actually gone. Even people now when you go to the market, for example, something that will be produced locally like a flour or whatever, people will charge you more.
“Why? Because they’re paying very high prices on diesel. And what we did, for example, in our refinery, we started selling even diesel at about 1,200 for 1,650. And I’m sure, you know, as we go along, things will continue to improve quite a lot.
“Well, even now it’s a lot of impact. If you look at it now, when you are buying 1,650, 1,700 for a litre of diesel, and that one has been cut off by almost one third to now be paying diesel at 1,200.
“And maybe eventually going forward, even though the crude prices are going up, even with that, I believe people will not get it much higher than what it is today.
“1,200, it might be even a little bit lower. But that can help quite a lot. Because if you are transporting locally produced goods, rice and other stuff, you are paying 1,650.
“Now you are paying two thirds of that amount, 1,200. It’s a lot. It’s a lot of differences. People don’t know.
“That can actually help to bring inflation down immediately. And I’m sure when the inflation figures are out for the next month, you see that there’s quite a lot of improvement in the inflation rate.
“So step at a time. And I’m sure the government is working around the clock to make sure that things get much better.
Because it’s in their own interest. It’s in the interest of everybody, It’s in our own interest, and I just want to thank everybody for the Nigerians to get things better.
Dangote urged captains of industry to partner with the government to improve the lives of Nigerian citizens. “You can’t clap with one hand,” he said.
“So both the entrepreneurs and the government, they need to clap together and make sure that it is in the best interest of everybody.”
Commenting on this, president of Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, said though his association has approached Dangote seeking downward review of diesel price to marketers but it is not clear how much the refinery is willing to reduce for now.
Gillis-Harry, however, said the current report that oil marketers are proposing N700 to N850 per litre to Dangote Petroleum Refinery is not realistic as the refinery would not sell below cost of production.
The PETROAN president said such thinking is just an illusion as the cost of diesel production is well above that proposed figure.
Our Correspondent gathered that the refinery may be refining the product at about N950 per litre and which would not give room for such proposals.
He said currently his association buys diesel from Dangote at the cost of N1, 200 for a litre of diesel and has proposed for a little downward review.
The marketers argue that the current price, between N1,225 and N1,300 per litre is too high considering the refinery’s location within Nigeria and the recent appreciation of the naira.
The report quoted the Independent Petroleum Marketers Association of Nigeria, IPMAN as proposing a price range of N700 to N850 per litre for Dangote diesel.
The association points out that imported diesel currently lands in Nigeria at around N1,250 per litre due to the stronger naira.
Since Dangote avoids import costs like vessel rentals and foreign exchange fluctuations, they believe the locally produced diesel should be significantly cheaper
The Board of Trustee, BoT (Treasurer) of IPMAN, Elder Chinedu Okoronkwo, in a chat with our Correspondent said, his association has set up a committee to look at various options that could help in bringing down cost of the product.
Okoronkwo said the association is demanding access to foreign exchange at an official rate and that if that happens given the strength of the naira it would help in reducing the price.
“We are looking at the market fundamentals and as business men we focus on destinations where we can get products and sell in a competitive environment.
“Yes we look at Dangote giving us a reduced rate but if the exchange rate environment brings us to getting it cheaper then we opt for importation.” he said.
Meanwhile, the refinery is scheduled to provide marketers with Premium Motor Spirit (PMS) also known as petrol, in May 2024.
The refinery has already started supplying domestic marketers with diesel and aviation jet fuel at a price of 1,225 per litre.
This move could result in a decrease in the retail price of both products in the upcoming months, according to the emerging reports.
Nigeria will be considerably less dependent on foreign petroleum products starting in May when the new mega-refinery starts supplying PMS to the local market.
Last month, the refinery, which started operations in January, exported its first goods: 65,000 metric tonnes of low-sulphur straight-run fuel oil and roughly 60,000 tonnes of naphtha.