With the imminent arrival of Premium Motor Spirit (PMS), commonly known as petrol, from the Dangote Petrochemical Refinery in the local market within the next two to three weeks, petroleum marketers are expressing concerns that the fuel’s price may exceed expectations.
These concerns arise from the refinery’s challenges in sourcing feedstock locally from international oil companies (IOCs), compelling Dangote to import crude oil from the United States and other countries at a higher cost. This reliance on imported crude has already impacted the prices of diesel and aviation fuel, making them less attractive to local marketers.
Petroleum marketers highlighted that the cost of importing crude oil could increase the production cost, potentially leading to a higher ex-depot price for Dangote’s PMS. Aliko Dangote, Chairman of the Dangote Group, has announced that PMS from the refinery will be available in the Nigerian market by the third week of July.
Marketers and Nigerians have been hopeful that the Dangote refinery would help reduce the price of PMS, which surged from around N200/litre to over N600/litre following the removal of fuel subsidies by President Bola Tinubu on May 29, 2023. However, the lack of access to local crude oil has raised doubts about the potential for price reductions.
Hammed Fashola, the National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), expressed concerns that the importation of crude oil would lead to higher prices for Dangote’s petrol. He noted that the refusal of IOCs to sell crude to Dangote poses a significant challenge to the $20 billion refinery, despite the IOCs’ other business commitments.
“The non-supply of crude is a big challenge for Dangote. You know Dangote cried out too. The international oil companies too will have their reasons; you know they have their commitments too. It’s not like they will start feeding Dangote only. People should understand that. I think Dangote should consider that. I know this prompted Dangote to go outside the soil of Nigeria to seek crude oil. You know when he keeps bringing crude oil from the United States, that is another cost. That is another problem we are scared of because it will still boil down to the high cost of petrol, unlike where he can source the crude locally in Nigeria,” Fashola said.
To address this issue, Fashola urged the Federal Government to assist Dangote in securing a local supply of crude oil. He suggested that this support would alleviate the problems related to fuel availability and affordability in Nigeria.
“I will advise that the government should assist Dangote in the supply of crude oil. If Dangote can get an adequate supply of crude oil locally, I think the whole problem will be solved somehow. I don’t think there will be any need for anybody to go and bring in petrol again, especially if Dangote is selling at a reasonable price,” he added.
Fashola also cautioned Dangote against monopolizing the market if the government provides support, emphasizing that the refinery should sell PMS at a reasonable price to avoid encouraging fuel imports.
“Dangote too should not see it as an advantage to start monopolising the market by raising fuel prices. Dangote has to come with a clean mind by selling at a reasonable price to the public, otherwise, people will still go and start importing if Dangote’s price is high. But if the price is normal and anybody who brings in product from abroad knows that he would run at a loss, nobody will venture into it. Dangote should be sincere, and the government should support him,” he stated.
Fashola expressed optimism that the refinery would help narrow the price gap between major and independent marketers, including Nigerian National Petroleum Company Limited Retail outlets. He anticipated a slight price reduction, contingent on the availability of local crude oil.
“I don’t want to start predicting, but we envisage a situation where the price gap would be closed somehow, unlike what is obtainable now when the NNPC sells at N568 in Lagos and independent marketers sell at N650, N700 or more. I believe that the gap will be closed. Even if there is a price differential, it won’t be as wide as it is now.
“We also expect that there may be a little bit of a reduction in the price, but I believe that the price will be unified somehow. I don’t want to mention figures, I like to say something accurate. For now, I cannot mention any price, but I know that there may be a little reduction and there may be a little bit of uniformity in the price. It won’t be like what we have presently,” he noted.
Fashola confirmed that independent marketers are prepared to purchase fuel from Dangote within the next two to three weeks and called on the refinery’s management to finalize partnership discussions with the association.
Previously, IPMAN National President Abubakar Maigandi accused Dangote of refusing to partner with the association, which he believed would benefit the company in the market.
“Yes, we are ready. We are all looking forward to importing fuel from Dangote this month. But at the same time, we want to use this opportunity to call on the management of Dangote to finalise discussions with IPMAN as a body. That will be more beneficial to both parties. Since all these days, they have not finalised the partnership discussions with us.
“We have some of our members who have already registered with Dangote, but we believe that going there as an association will be better for us and Dangote himself because we are the market. We are the ones buying from both MEMAN, DAPPMAN and others. So, it is an advantage, maybe they are not seeing it, but I think by now they have seen it; they should take advantage of the opportunity so that they will just have the whole market in their pocket,” he submitted.
An official from the Dangote refinery revealed that Aliko Dangote had informed the public about the difficulties in dealing with IOCs, who have been accused of frustrating efforts to make the refinery operational. The official emphasized that importing crude oil from the US has significantly increased costs, affecting the potential for lower fuel prices.
“If Dangote gets crude oil locally, there wouldn’t be any issue. You know Dangote is importing with dollars. So, there is no way Dangote will sell below the cost price. But these traders are importing dirty fuels from Russia at a cheaper price.
“We keep importing crude from the US because the IOCs refuse to sell to us. That’s the problem. If IOCs could be selling to us, we wouldn’t have any crisis; we would be selling at a price everybody would be happy with. Look at what the dollar is saying now; if we are buying crude at a dollar that exchanges for N1,484, how much do you want us to sell? But if we are getting it in Nigeria, the cost will be reduced, and it will be cheaper.
“If the Federal Government allows us to buy in Nigeria, it will be cheaper. What we need to do is just to refine and sell. But in this case, we have to import from the US, so it’s very expensive. Some people are just playing politics with this thing to frustrate the refinery,” the Dangote Group official stated.
The Dangote refinery recently reduced the price of diesel from around N1,600 per litre to N1,000, with the current price at approximately N1,200 per litre.
Aliko Dangote recently announced that Nigeria would cease importing fuel once his refinery begins selling PMS in mid-July.
Olufemi Adewole, Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), stated that the price of Dangote petrol would depend on the source of its crude oil, avoiding speculation on the final price.
“It is not for us to speculate. The crude he gets at the time he gets it is what determines the price. We are not going to speculate on what we have not received,” Adewole stated.
Regarding the potential impact of the NNPC price on Dangote’s fuel, Adewole noted that the supplier’s price would dictate the market rate.
“Whoever we get the product from will determine the price. Has Dangote revealed how much he will sell his PMS? Let’s wait until Dangote releases his price. For as long as Dangote has not released any price, we may watch and wait. We buy diesel from him; we buy aviation fuel from him. Those are the ones that are on right now. Anything on PMS, until then we will cross the bridge. Whatever price he gives us, we will buy and sell to Nigerians.”
Adewole confirmed that depot owners are ready to lift PMS from Dangote once it becomes available, stating their willingness to cooperate with all parties in the downstream sector.
“Of course, if Dangote starts PMS loading tomorrow, we will buy from him. We have recently stated that we are ready and willing to cooperate with everybody in the downstream sector. Dangote is the one we will be buying from, forget the fact that we made a press release last week. It is the only refinery that is available for us for now and we are going to buy from them,” he disclosed.
On whether his members have registered to get PMS supply from Dangote, he said, “Has Dangote started giving out the PMS? We are picking ATK from him, we are picking diesel; marketers are picking from him, so there is no problem about that. Once he starts PMS, we fall in line too.”
Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, accused IOCs of deliberately frustrating the refinery’s efforts to purchase local crude, claiming that they are setting prices above the market rate by $6, forcing Dangote to import crude from distant countries like the US, thereby increasing production costs.
“The IOCs are deliberately and willfully frustrating our efforts to buy the local
crude. It seems that the IOCs’ objective is to ensure that our petroleum refinery fails. It is either they are deliberately asking for a ridiculous and humongous premium or they simply state that crude is not available.
“At some point, we paid $6 over and above the market price. This has forced us to reduce our output as well as import crude from countries as far as the US, increasing our cost of production.
“It appears that the objective of the IOCs is to ensure that Nigeria remains a country, which exports crude oil and imports refined petroleum products. They are keen on exporting the raw materials to their home countries, creating employment and wealth for their countries, adding to their Gross Domestic Product (GDP), and dumping the expensive refined products into Nigeria, thus making us to be dependent on imported products,” Edwin stated.
Meanwhile, the Dangote oil refinery is increasing diesel exports to West Africa, capturing market share from European refiners. According to traders and shipping data from Reuters, the refinery was producing a lower grade of gasoil than expected, prompting the plant to seek buyers in neighboring markets. Exports of gas oil from the refinery nearly doubled to 100,000 barrels per day in May, with the majority going to other West African countries and one cargo shipped to Spain. Preliminary June gasoil volumes decreased, though overall oil product exports remained relatively high at 225,000 barrels per day.
