A significant relief has emerged for Nigeria’s oil market following clarification from petroleum marketers that the newly operational Dangote Refinery, located in Lagos, will sell its products in naira rather than the previously speculated US dollars.
The possibility of the refinery pricing its products in dollars had raised concerns within business circles, particularly among importers who already face challenges accessing scarce dollars. If oil marketers were to join the ranks of dollar-seekers, it would have added more pressure on Nigeria’s foreign exchange market, potentially leading to further currency instability and distorting both pricing and supply timelines.
The Dangote Refinery, with an impressive capacity of 650,000 barrels per day and a $20 billion investment, began its operations earlier this month, initially focusing on the production of diesel and aviation fuel in the first phase. This marks a pivotal milestone for the Nigerian energy sector, as the refinery is set to gradually expand its production to include petrol, kerosene, and liquefied petroleum gas (LPG), with significant quantities also earmarked for export.
Industry observers have highlighted that the refinery is poised to shift local and global supply dynamics, making a substantial impact on fuel availability, pricing strategies, and operational efficiencies in Nigeria’s oil sector.
In response to earlier concerns, marketers confirmed that the Dangote Refinery will indeed price its products in naira for the local market. Additionally, the registration process for marketers wishing to distribute these products remains ongoing, as many operators continue to sign up with the refinery.
Furthermore, it was reported that officials from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) are in active discussions with the refinery’s management to finalize the pricing structure for the products.
The refinery recently announced its official production of diesel and aviation fuel on January 12, 2024. Aliko Dangote, President of Dangote Group, expressed his pride in this achievement, calling it a game-changing development for Nigeria’s oil industry. He emphasized the refinery’s significance in demonstrating the country’s capacity for large-scale industrial projects.
As part of the refinery’s ongoing developments, seven major oil marketers, including 11 Plc, Conoil Plc, Ardova Plc, MRS Oil Nigeria Plc, OVH Energy Marketing Ltd, Total Nigeria Plc, and NNPC Retail, have registered to distribute its refined products. The refinery is also expected to supply fuel to approximately 150,000 retail outlets managed by the Independent Petroleum Marketers Association of Nigeria (IPMAN), after discussions between refinery management and IPMAN executives.
While some speculated that the refinery would sell products in dollars due to the international nature of crude oil trading, Chief Ukadike Chinedu, the National Public Relations Officer of IPMAN, confirmed that the refinery’s transactions within Nigeria will indeed be conducted in naira. He further clarified that while crude oil purchases may be priced in dollars, refined petroleum products will align with the local currency, as is the case with other Dangote Group businesses like cement and food products.
Chinedu also pointed out that the Nigerian government would need to address the widening foreign exchange gap to stabilize the cost of petroleum products, which are heavily influenced by the exchange rate. He expressed confidence that the pricing of refined products would be determined in consultation with the relevant regulatory authorities, and the public would be notified once pricing is finalized.
