Industry analysts and marketers in Nigeria’s oil and gas sector have expressed skepticism that the upcoming fuel supply from Dangote Refinery will lead to a reduction in petrol prices. This sentiment arises as the refinery’s Chairman, Aliko Dangote, recently postponed the start date for Premium Motor Spirit (PMS) supply to mid-July 2024, citing minor delays.
Despite the refinery’s commencement of diesel and aviation fuel supplies in April, and its commissioning on May 23 last year, it has faced persistent challenges in securing crude oil necessary for petrol production. Dangote has alleged that powerful cartels within the oil and gas sector are actively working to thwart the refinery’s efforts to begin full-scale operations.
In statements made at the Afreximbank Annual Meetings in Nassau, Bahamas, and in an interview with CNN, Dangote claimed these cartels are determined to see his company fail. Devakumar Edwin, Vice President of Dangote Industries Limited, further accused international oil companies (IOCs) of obstructing the refinery by refusing to sell crude oil at reasonable rates, instead demanding a premium of $6 above the market price.
This situation has forced the refinery to import crude oil from the United States, despite Nigeria’s abundant crude deposits. The Lagos State Chamber of Commerce and Industry has linked the refinery’s crude supply issues to oil theft and pipeline vandalism. Responding to Dangote’s allegations, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has promised to ensure IOCs supply crude to Dangote Refinery, but the issue remains unresolved.
Billy Gillis-Harry, President of the Petroleum Products Retail Outlets Owners Association (PETROAN), expressed doubt that the introduction of Dangote Refinery’s fuel would lower prices. He pointed out that when the refinery introduced diesel and aviation fuel, expected price reductions did not materialize, with Nigerians still paying N1403.96 for diesel.
Gillis-Harry highlighted that importing crude from the US for refining in Nigeria would not result in lower petrol prices, as the need for foreign exchange to purchase crude would lead to fluctuating prices.
“There is no way you will expect that the price of fuel will crash,” he said, doubting any potential subsidy regime for Dangote’s petrol.
Following the removal of fuel subsidies last year, petrol prices surged to an average of N769.62 per liter in May 2024, up from N238 the previous year. This, along with other government policies, has driven Nigeria’s headline inflation to 33.95% and food inflation to 40.66%, further eroding the purchasing power of Nigerians.
Regarding the Nigerian National Petroleum Corporation Limited (NNPCL) potentially exiting the supply market upon Dangote Refinery’s entry, Gillis-Harry noted that while Dangote is anticipating business opportunities, stakeholder input is essential in making such decisions. He concluded that while Dangote Refinery could help address supply shortfalls, a significant price reduction is unlikely without strategic market entrance tactics.
"Dangote Refinery will be a solution to shortfalls in the supply of PMS, not a price cut. Unless it (price cut) will be a trade entrance strategy,” he said.
Gillis-Harry also expressed skepticism about the timely commencement of operations at the Port Harcourt, Kaduna, and Warri refineries due to repeated delays. He emphasized the importance of transparency in fuel subsidy spending, asserting that the current fuel pump price reflects the application of subsidies.
“There is nothing like quasi-fuel subsidy; the subsidy is applied, it is applied. Nigerians deserve to know the value of the fuel subsidy spent," he said.
As the debate over the challenges facing Dangote Refinery continues, stakeholders remain cautious about the impact of domestic fuel supply on prices. The refinery’s efforts to overcome supply hurdles and the broader implications for Nigeria’s oil and gas sector will be closely monitored in the coming months.
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