An industry expert explains the factors behind why Dangote may not be able to offer petrol at lower prices than NNPCL, shedding light on production costs and market dynamics.
Henry Adigun, an oil and gas analyst, clarified that due to dollar-based costs associated with petrol production at the Dangote Refinery located in Lagos, it may not be feasible for them to offer fuel at prices any less than those being offered by Nigerian National Petroleum Company Limited (NNPCL).
Adigun mentioned in an episode of Inside Sources, a socio-political program broadcasted on Channels Television, that the price of the $20 billion refinery’s high-grade petrol will be impacted by several factors including production costs and currency fluctuations. He also stated that this industry is heavily influenced by dollar rates which would permit Aliko Dangote to dictate prices based on expenses incurred during fuel production.
Adigun clarified that Dangote faces substantial costs since he obtains just 40% of the crude from NNPCL and acquires the rest from other nations like the United States. In addition, his refinery’s single-train setup necessitates combining Nigerian oil with foreign oil for manufacturing purposes.
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Adigun stressed that Dangote obtained loans in US currency and is obliged to reimburse them in the same denomination, which adds up to the overall expenditure. On being queried about possible gasoline prices from Dangote’s refinery, Adigun projected a minimum of ₦850 per liter because of these operating costs.
Despite being Africa’s biggest economy, Nigeria relies on imported refined petroleum as its state-owned refineries are inactive. This has led to a significant increase in petrol prices, especially after the discontinuation of subsidies in May 2023. The rise in prices has escalated fuel shortage and caused an upsurge from ₦200 to approximately ₦800 per litre, thereby affecting citizens who depend heavily on petrochemicals for powering vehicles and generators- mainly due to unreliable electricity supply.
Expected to achieve its full production capacity of 650,000 barrels per day before the year ends, the Dangote Refinery commenced partial operations in December 2022 and has already started furnishing diesel and aviation fuel. Following completion of ongoing negotiations with NNPCL, petrol distribution will commence. Meanwhile, due to Nigeria’s persistent energy challenges; by mid-September, NNPCL is set to purchase gasoline from Bellwether refinery without delay.
