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PETROL HIKE IMMINENT AS GOVT, DANGOTE REFINERY CONCLUDE CRUDE OIL DEAL
The Federal Government’s committee, established to facilitate crude oil sales to local refineries in naira, is set to discuss the pricing of Premium Motor Spirit (PMS) from the Dangote Petroleum Refinery, scheduled for release in September 2024, as reported by Punch on Monday, August 26,2024.
Sources within the oil industry and the Implementation Committee on crude oil sales, led by Finance Minister Wale Edun, confirmed that the panel is meeting to finalize a framework on the benchmark price Dangote will pay for crude in naira.
The discussions will also address whether the government will subsidize Dangote’s petrol or allow market-based pricing.
Oil marketers have expressed concerns that petrol from the Dangote refinery may be more expensive than current pump prices, which range between N600 and N700 per litre across Nigeria.
According to the Major Energy Marketers Association of Nigeria, the landing cost of PMS is around N1,117/litre, reflecting the true market price. They expect Dangote’s petrol to be priced similarly unless there is government intervention.
Presently, the Nigerian National Petroleum Company Limited (NNPCL) is the sole importer of petrol, as other marketers cannot access the U.S. dollars needed for imports.
NNPCL’s Chief Financial Officer, Umar Ajiya, revealed that the company bears a substantial subsidy burden, offsetting the difference between the high landing cost and the lower retail price through an arrangement with the government.
He stated, “No one has been paid a kobo by the NNPC in the name of subsidy” over the last eight to nine years. NNPCL has covered about N7.8 trillion in shortfalls during the first seven months of 2024.
The government is considering two options: either subsidizing Dangote’s petrol or allowing Nigerians to pay the full market price. A source at the Federal Ministry of Petroleum Resources noted, “The solution is for Nigerians to pay the real cost of petrol or for the government to bring back subsidies.”
The source added that the framework for crude supply to Dangote in naira is almost finalized, though exchange rate challenges persist.
Marketers have expressed willingness to purchase PMS from Dangote but are concerned about the price. A senior official of the Major Energy Marketers Association of Nigeria commented, “When it comes to price, that’s the second thing… Dangote cannot clear the subsidy by himself.”
The government’s push for Compressed Natural Gas (CNG) as an alternative is seen as a potential solution, although progress has been slow.
Regarding crude oil supply in naira, the committee expects the first PMS delivery from Dangote next month.
The agreement was reached during a recent committee meeting led by Finance Minister Edun, and the sale of crude oil to Dangote and other local refineries is set to begin on October 1, 2024.
Despite ongoing challenges, the government and Dangote are expected to finalize pricing and other logistics in the coming weeks, with many industry players emphasizing the need for an economic strategy that balances affordability and profitability.
