Price Hike: Dangote Refinery Won’t Sell Petrol At A Loss – Expert

Dangote Refinery is expected to prioritise profit despite high fuel prices in Nigeria, according to energy expert, Olabode Sowunmi.

Speaking on ARISE News on Wednesday, Olabode Sowunmi, Chairman of the Energy Transition Study Group at the Nigerian Gas Association, addressed these concerns.

He pointed out that the Dangote Refinery, while a beacon of hope for some, remains a business venture with a primary focus on profitability.

“Dangote Refinery is a refinery, so there is an average cost of refining. That cost is going to be passed on to the final consumer,” Sowunmi explained. “There is an average cost to the price of crude oil. So, at the end of the day, they are going to sell not at the prices that people want, they are going to sell at a price that is competitive and to some extent, profitable for them.”

Nigerians Question Dangote Refinery’s Impact Amid Rising Petrol Prices

As Nigerians grapple with soaring petrol prices, questions are being raised about the role of the recently operational Dangote Refinery in alleviating the country’s fuel crisis.

With pump prices surging to over N800 per litre, many are wondering whether the refinery, now a significant player in Nigeria’s energy sector, will offer any relief by selling petrol at lower prices to ease the burden on citizens.

Dangote Refinery’s Business Imperative

The notion that Dangote Refinery might sell petrol at reduced rates out of nationalistic duty is, according to Sowunmi, unrealistic. He stressed that the refinery’s operations are driven by profit, not charity.

“I do not know any business venture that runs like an NGO. The aim of NGOs is not to make a profit, it is to develop,” Sowunmi noted. “However, when it comes to a venture where somebody has put in capital, taken risks, and invested effort, the primary purpose is profit. It’s unreasonable to expect Dangote Refinery, after such substantial investment, to operate without seeking profit.”

Sowunmi also highlighted that Dangote Refinery’s responsibility is primarily to its stakeholders. “Dangote too is a business, and the first duty of any private business is to its shareholders. It’s not a developmental organization, so it’s not going to run its business and its debt based on a loss. They are going to run it at what is competitive and what has an average profit for them. These are the facts that we as Nigerians need to come to terms with.”

Potential Advantages for Nigerians

Despite these realities, Sowunmi pointed out the potential benefits of the Dangote Refinery’s operations, particularly its ability to purchase crude oil in naira rather than dollars. This could help stabilize petrol prices domestically by reducing the refinery’s exposure to foreign exchange fluctuations.

READ ALSO: Dangote Refinery To Supply 25 Million Litres Of Petrol Daily In Sept – NMDPRA

“We’ll recall that Dangote’s crude oil is being sold to it in naira. That has advantages across many areas. One significant advantage is that they are not under pressure to procure dollars for their operations, which means they are more or less obligated to price their products in naira,” Sowunmi said.

Transparency in Distribution

Another crucial aspect Sowunmi emphasised was the importance of transparency in tracking the distribution of petroleum products from the Dangote Refinery. Accurate monitoring could offer a clearer picture of Nigeria’s daily fuel consumption, a figure that currently remains disputed among various authorities.

“The other issue will now be, how much of the refined products that Dangote is producing will actually meet Nigeria’s capacity? As of today, nobody knows. There are different figures from different sources. But if Dangote can monitor every single truck that leaves their depot and ensure transparency, we might finally have a clear idea of our daily petroleum consumption,” Sowunmi concluded.

As Nigerians wait to see the full impact of Dangote Refinery’s operations, experts like Sowunmi caution that while the refinery might bring some stability to the market, it is unlikely to operate at a loss for the sake of patriotism. Instead, it will function as a profit-driven enterprise, albeit one with potential benefits for the nation.