Anticipation is building across Nigeria as discussions intensify around the potential impact of Dangote Petroleum Refinery’s petrol production on the country’s pump prices. Will it lead to a reduction, stabilize the current rates, or trigger yet another hike? These questions dominate conversations in homes and businesses alike.
The buzz follows a recent announcement that the $20 billion Dangote Refinery, with a capacity to refine 650,000 barrels of crude oil daily, is set to begin petrol production and sales within the month. While this development promises to increase the availability of fuel, uncertainty surrounds its influence on pricing.
Adding to concerns, recent fuel scarcity across parts of Nigeria has heightened anxiety. Fuel marketers attribute the situation to supply challenges from the Nigerian National Petroleum Company (NNPC) Limited, which remains the sole importer of petrol in the country.
Experts largely agree that in the short term, the refinery’s operations are likely to ensure consistent fuel availability and possibly stabilize prices. However, significant price reductions appear unlikely. The privately owned Dangote Refinery, in which the Nigerian government holds a 20% stake, already supplies diesel and aviation fuel locally. Its entry into the petrol market raises hopes, but the company has yet to disclose its pricing strategy for petrol.
Industry analysts caution against high expectations of lower prices. The refinery sources crude oil at international market rates, incurs costs for freight, and operates with a profit-driven model. This reality may dampen optimism for a substantial drop in pump prices. While the refinery’s operations contributed to a notable reduction in diesel prices earlier this year—from ₦1,200 per liter to ₦1,000—petrol may not see a similar trend.
Bismarck Rewane, CEO of Financial Derivatives Company Limited, echoed this sentiment during an interview on Channels Television. Rewane emphasized that while the Dangote Refinery would significantly enhance petrol supply in Nigeria, its impact on pricing and foreign exchange stability would be limited.
“People need to temper their expectations. Dangote Refinery will not necessarily make petrol cheaper in Nigeria but will ensure a more consistent supply,” Rewane stated. He explained that operational costs and the international nature of the refinery’s dealings would make pricing competitive but not drastically lower.
He further noted that the refinery operates within a free trade zone, and while it benefits from cutting-edge technology that improves efficiency by 45% compared to older refineries, the cost savings primarily stem from reduced transportation distances rather than drastic changes in foreign exchange dynamics.
In conclusion, while the Dangote Refinery marks a pivotal moment in Nigeria’s energy sector, its immediate impact will likely be improved availability rather than substantial price reductions. It represents a step toward reducing reliance on imports but is unlikely to address all of Nigeria’s foreign exchange challenges or fuel pricing issues.
