DANGOTE REFINERY: PETROL PRICES UNLIKELY TO GO DOWN – EXPERTS
Experts have said that the commencement of operations at Dangote Refinery will not lead to a significant drop in petrol prices in Nigeria.
The experts, who spoke in an interview on Thursday, said the refinery’s operations will lead to a more stable and predictable supply of petroleum products, reducing the volatility in prices caused by importation and supply chain disruptions.
However, they cautioned Nigerians against expecting a sudden and drastic drop in pump prices.
Last Monday, Devakumar Edwin, vice president at Dangote Industries Limited, said the 650,000 barrels per day Dangote Refinery has begun the processing of petrol.
Mr Edwin explained that the Nigerian National Petroleum Company Limited (NNPC Ltd), Nigerias sole importer, would buy its product exclusively.
Speaking to reporters, the President of Dangote Group, Aliko Dangote, said the petrol refined from the refinery would hit filling stations across the country within 48 hours, depending on the NNPC Ltd.
Speaking on the latest development Thursday, Dan Kunle, an energy expert, emphasised that the narrative of price crashing is “wrong”, noting that the pricing of petroleum products will still be determined by global market forces and other factors.
“This narrative of price crashing is a wrong narrative. Let me take you back to basic economics. Production capacity and supply capacity are the most important aspects of any goods or commodity or services that citizens enjoy. If the production capacity and the supply system is weak, you can never enjoy steady supply and steady price.
“The circumstance in which this country is today, the first thing Nigerians should look out for is the production capacity of petroleum products and the supply chain guarantee; it is then you can begin to see whether price can be stable and not be jumping every day and then you can begin to say, since the production capacity have scaled up so much, prices may begin to fall or to remain stable,” Mr Kunle said.
He explained that the stability of supply and production capacity will lead to a stable price, not necessarily a cheap one.
“So, when MTN came to market, MTN and Airtel, was the price of the telephone cheap? No it wasn’t because it was at an entry level, it was a take off period, so for now, people should not carry this wrong narrative that because Dangote is refining crude oil locally, it means the price will be cheap. No, the price can be stable because there is something we call production capacity and supply capacity,” he said.
Mr Kunle said if Dangote refinery has production capacity but does not have guaranteed supply of crude, the raw material, at a reasonable price, the output will hardly translate to cheaper petrol.
“It’s not possible in pragmatic economics,” he said.
According to him, if the cost of the crude is very high, the output of the products from crude will also be relatively high.
“If Dangote gets crude at international price and they translate it to naira, sufficient crude, 700,000 barrels per day and they translate it to naira, and they give him every day unfailingly, and he refines it, that gives Nigeria a stable source of supply of Premium Motor Spirit (PMS) and if that continues like that, you can now say, supply of PMS locally is now more than even excess, then the price may adjust reasonably down, depending on the cost of production of the crude, so the cost of PMS is a derivative of the cost of the crude.
“If crude oil is $100 per barrel and it costs Nigeria $48 to produce, that means when you give that crude oil to Dangote to refine, or to any refinery to refine, $100 multiplied by the exchange rate, because you’re selling to him in naira, so when he adds his refining cost and everything, so how can the petrol per litre be cheaper than what it is now? It will be high. But if crude oil is $50 multiplied by the exchange rate you give it to him, plus his refining cost, the price again also will reflect the cost input of crude,” he said.
He said what Nigerians should be looking at henceforth, is that for the first time in history, the nation is going to have steady supply of petroleum products.
“That steady supply and stability will make you and me to plan because we will no longer go and spend one hour, two hours in petrol station, so you can now adjust your income, what we call income allocation, you can reallocate your income and say oh, this week, I will not spend more than N2,000 on petrol, this is what I will spend. Why? You could now plan. So the one hour you used to waste in the petrol station, you could now go and use it to do other things productively,” he added.
Also speaking, Muda Yusuf, director of the Centre for the Promotion of Private Enterprise (CPPE), noted that the pricing issue will depend on various factors, including the cost at which Dangote gets the crude.
He stated that if the cost of crude is low, there may be a reduction in price, but if the cost is high, the price of the product will also be high.
“The pricing issue will depend on a number of factors. First it depends on the cost Dangote gets the crude. If the cost at which Dangote refinery get the crude is low, may be by virtue of concession given by NNPC or the condition given by the government then we are likely to see a reduction in price as a result of the coming on board of Dangote.
“That’s the principal factor because if crude oil is selling at $80 and Dangote has to buy crude at that maybe $80 or more, there is no way that can bring down the price of his product. Even the social environment at which we are, the NNPC at the current prices still subsidise fuel. So, unless the government is trying to subsidise the product for Dangote as well,” Mr Yusuf said.
He explained that the fact around Dangote is not enough to change the price; it depends on the condition under which he is able to get the crude.
“Government has offered NNPC to sell the crude in Naira, but we don’t know at what exchange rate they are using, we don’t know how much they are going to sell it per barrel. So, the major determinant will be the cost of the crude that will determine what will happen,” he said.
On Friday, the Nigerian government announced that loading of petrol from Dangote Refinery will begin on Sunday.
FUEL PRICE HIKE: MARKETERS GIVE CONDITIONS TO BUY DANGOTE PETROL, EYE IMPORT
FUEL PRICE HIKE: MARKETERS GIVE CONDITIONS TO BUY DANGOTE PETROL, EYE IMPORT Petroleum marketers in Nigeria say they are standing in limbo over the controversy surrounding Dangote Refinery Premium Motor Spirit (petrol) pricing as released by the Nigerian National Petroleum Company Limited on Monday. This comes as the petroleum marketers demanded that Dangote Refinery should disclose the price it sold petrol to NNPCL for transparency. Marketers further noted that the country cannot depend on domestic Petrol production to satisfy its daily consumption which stood at N50 million according to Nigerian Midstream and Downstream Petroleum Regulatory Authority latest data. The President of the Petroleum Products Retail Outlets Owners Association, PETROAN, Billy Gillis-Harry and the President of the Independent Petroleum Marketers Association of Nigeria, Abubakar Maigandi made this demand in a separate interview with DAILY POST on Monday. Fresh petrol price hike looms Recall that NNPCL on Monday announced a list of retail prices of Dangote Petrol across its outlets nationwide. The new petrol prices showed that petrol will be sold at N950.22 per liter in Lagos State. Oyo and other South West states will pay N960 per liter for Petrol. In Federal Capital Territory (Abuja), Kano, Kaduna petrol price will stand at N999.22 per litre. Also in Imo and Rivers states, the price of petrol will be N980.2, while Borno State will pay N1,019.22 per litre. Although DAILY POST gathered on Monday that the new prices have not been affected, the pump price of fuel may soon go up across the country. Meanwhile, DAILY POST observed that NNPCL is yet to announce the price it would sell Dangote Refinery Petrol to marketers, owners of a majority of fillings stations in Nigeria. The pump price of petrol at Independent marketers’ filling stations usually surpasses that of NNPCL retail outlets by over N100, which may bring the price of fuel to around N1,200 per liter. Dangote Petrol Price Controversy Dangote Refinery commenced first distribution of Petrol at the weekend with NNPCL as an official offtaker. NNPCL had revealed that Dangote Refinery sold petrol to them at N898 per liter. However, Dangote Group faulted NNPCL, but did not disclose the actual price it sold its inaugural petrol. The development resulted in a petrol price controversy which further worsened the crisis in the sector. Why Dangote Refinery should tell Marketers petrol price – Gillis-Harry Reacting, PETROAN president, Gillis-Harry called for absolute transparency in the oil and gas sector. According to him, the Dangote Refinery needs to come open to stakeholders on the exact price of its petrol as a prerequisite for marketers to purchase the product. “Dangote Refinery should tell us what price it is selling its petrol since NNPCL has given its selling price. “We should be able to know exactly what price that is coming from Dangote Refinery Petrol to us. We should know how NNPCL will deal with us. As it is now, we are standing in limbo”, he told DAILY POST. NNPCL yet to release Dangote Petrol price for Marketers – IPMAN On his part, IPMAN president, Maigandi said he is waiting for the NNPCL to release the prices it would sell Dangote Petrol to marketers. He expressed displeasure with the scheme of things within the sector over the conflicting petrol pricing coming from Dangote Refinery and NNPCL. “We are waiting for NNPCL to release prices that independent marketers will be buying petrol. They have not. “We are buying directly from NNPCL, not Dangote Refinery. Marketers can cope without any rate. “We, marketers, are not happy with the high cost of petrol because you have to use a huge amount of money to get the product. “Dangote Refinery has established its facility, let the government try to make the other refineries function, this may…