Hope dashed as petrol from Dangote Refinery costs more than imported fuel

As news broke that the Dangote Refinery had reached agreement to sell petrol to the Nigerian National Petroleum Company Limited (NNPCl), Nigerians began feeling excited and hoping that gasoline prices would drop in the country.

However, that hope was dashed on Sunday when the NNPCL announced that it bought petrol from the Dangote Refinery at over N898 per litre.

The Gantry price per ton at the refinery was quoted to be $736 which is equivalent of $0.55 per litre. At the official exchange rate of N1,637.59 to one dollar, the NNPCL said the cost of one litre of petrol stands at N898.78.

For each litre of petrol, NNPCL said apart from landing cost from refineries, there are statutory and regulatory charges suppliers must pay. Those charges include NMDPRA fee, N8.99; inspection fee, N0.97; distribution cost (Lagos) N15.00; and profit margin, N26.48. They must be added to the product’s landing cost to determine the pump price of petrol.

With all charges computed, the pump price of petrol in Lagos is estimated to be N950.22 per litre.

The state oil company said once freighting and other statutory costs are added, the product would cost more at the pumps – going for N950.22 per litre in Lagos, N980.22 in Rivers, and N992.22 in Abuja.

These prices are much higher than the current pump prices at NNPCL stations across Nigeria which sell between N855 and N897 per litre. Before the price adjustment in early September, NNPCL was selling the product between N580 and N620 per litre. The cargoes petrol sold at those prices were imported.

The NNPCL said as consignments from Dangote Refinery are discharged in fueling stations across the country, petrol would now sell for N999.22 per litre at its stations in Nigeria’s North-western geopolitical zone while in Borno and other North-eastern states, the product would cost an estimated N1,019 per litre.

In Nigeria’s South-east, petrol would cost N980.22 while consumers in South-west states (Oyo, Ogun, Ekiti, Osun, Ondo) would pay N960.22 per litre for the product.

The variation in prices is attributed to transportation costs and distribution challenges faced by different regions.

Since the NNPCL is for now the sole off-taker of petrol from the Dangote Refinery and would sell the product to other marketers, this development indicates that the marketers would buy from the NNPCL for at least N950 (in Lagos where the Dangote Refinery is located). The costs would be much higher in other parts of the country.

Already, many independent marketers across Nigeria sell the product above N1,000 per litre.

On Sunday, the Dangote Refinery disputed the disclosure by the NNCPL that petrol sold for N898 at its facility. But the refinery failed to disclose the price at which it sold the product to the NNPCL.

When contacted by PREMIUM TIMES on Sunday night, Anthony Chiejina, the company’s spokesperson promised to revert with the requested information. He has yet to do so as of 4: 00 pm on Monday.

But in a counter-statement, the NNPCL insisted it bought the product for over N898 per litre but would be grateful for any discount from the Dangote Refinery that can be passed 100 per cent to the general public.

Oil and gas experts told PREMIUM TIMES that Nigerians should not expect the price of petrol to be lower just because it is refined in the country, as market forces would continue to determine prices.

The Dangote Refinery also did not promise cheaper petrol. In a recent interview with BBC Hausa, Aliko Dangote, president of the Dangote Group, said due to the high cost of the dollar and the fact that his refinery would not receive subsidy from NNPCL, it would be impossible for his facility to sell petrol below current market prices.

Mr Dangote said rather than lower prices, his refinery could only guarantee supply of enough product to satisfy market demands.

Before the commencement of petrol production by the Dangote Refinery and its sale to NNPCL, all of the petrol consumed in Nigeria were imported by the NNPC and then sold to other marketers.

Experts said the NNPCL is paying subsidies on imported fuel up to this moment. For instance, the current landing cost of petrol to Lagos and other ports is over N1200 per litre.

But the pump price at NNPCL stations hovers around N890, meaning the NNPCL is subsidising the margin. In August, PREMIUM TIMES reported that the government was subsidising petrol for over N500 per litre.

“… Whether they (government officials) say there is subsidy or there is no subsidy, the fact on the ground clearly states that there is something they are under-recovering,” said Zarama Mustapha, the national operations officer of the Independent Petroleum Marketers Association of Nigeria (IPMAN).