KEY POINTS
- Leading oil firms, including Total Energies and AA Rano, pay N766 per litre to lift petrol from the Dangote Refinery.
- Dangote Refinery’s petrol pricing impacts the broader Nigerian oil market.
- The price reflects the cost of lifting petrol from the refinery, which is one of the largest in Africa.
Some of the major oil companies in Nigeria such as Total Energies, AA Rano and 11 PLC have paid up to N766 per litre to lift petrol from the Dangote Refinery.
The pricing, which has attracted much attention in the oil market, shows the continuing process of the country’s fuel distribution system as the refinery expands.
The position of Dangote refinery in Nigeria’s oil industry
The Dangote Refinery which started in 2023 is one of the largest single-train refineries in the world. It was constructed to meet the challenges of Nigeria’s importation of refined petroleum products since the country exports crude oil.
It is believed that the refinery will transform the Nigeria oil and gas industry with the capacity to produce enough petrol to satisfy the domestic market and export to other countries.
The pricing structure of the refinery has now become one of the most influential factors that determine the oil market of the country.
Business Day has reported that the N766 per litre cost represents the lifting price of petrol from the refinery and this is an aspect that oil firms are incorporating in their distribution plans.
Price fluctuations and the responses of oil firms
The current price of N766 per litre by the Dangote Refinery has elicited a lot of controversy among the stakeholders.
However, the cost of importing petrol from other international refineries is relatively cheaper than the cost of lifting from Dangote refinery, but the latter is strategically situated in Nigeria to the advantage of local companies.
The domestic production of the refinery helps in the reduction of the importation of the products and the pressure that comes with foreign exchange which has been a major factor in the determination of fuel prices in Nigeria.
Nevertheless, the lifting price being higher, 11 PLC, Total Energies, and AA Rano have understood the long-term advantages of buying petrol from a local refinery.
They can buy locally refined petrol which helps them to minimize some of the problems of importing fuel such as delays in transportation and fluctuating exchange rates.
Furthermore, buying made-in-Nigeria products is in line with the Nigerian government’s overall policy of attaining energy security and minimizing import dependency.
Generalization of the findings for Nigeria’s oil industry
With the Dangote Refinery gradually coming upstream, it is expected that the company will play a more active role in the determination of fuel prices and their availability in Nigeria.
The ability of the refinery to provide petrol in the market at a steady rate is a strength for the company especially as Nigeria faces economic problems and volatile oil prices in the global market.
In the long run, Dangote’s operations may assist in stabilizing fuel prices within the country, which may lead to a decrease in the costs of fuel to the consumers since the production of fuel will be done locally.
However, the current lifting price of N766 per litre is a true reflection of the cost of starting up a large-scale facility with the expectation that the cost will come down as the refinery gains full capacity.
Expectations of future price changes
While the current market price to lift petrol from the Dangote Refinery is expensive, there is hope that this will not remain the case.
According to industry analysts, the price per litre may come down as the refinery ramps up production and achieves higher efficiency to the benefit of the oil firms lifting the product and the Nigerian consumer.
For now, the price of N766 per litre may be regarded as a measure toward energy independence for Nigeria.
Over time, the country expects to see more stability in petrol prices and a more independent energy sector due to the capacity of the Dangote Refinery.
