Victor EzejaWhile Nigerian consumers grapple with high cost and scarcity of Premium Motor Spirit (PMS) also known as petrol, Dangote Refinery and petroleum marketers have been embroiled in a feud over supply and price.
This development, according to experts, calls for government intervention by creating a comprehensive policy to guide effective regulation and ensure that the consumers are not ripped off with unjustifiable prices.
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Prior to the commencement of local production of petrol by Dangote Refinery, many had expected that it would lead to a significant drop in price of petroleum products. The federal government recently announced that the petroleum market has been deregulated, assuring that it would engender a healthy competition, lead to availability of products and stabilise prices.
However, with the continuous surge in prices in recent times, many have expressed disappointment over the turn of events. Since the removal of subsidy on petrol in May last year, the price of the commodity has increased by over 400 per cent, with the implication on inflation as it has a spiral effect on other sectors of the economy.
The Nigeria National Petroleum Company Limited (NNPCL) which announced its withdrawal from being the sole distributor of Dangote Refinery petrol about one month after the facility started domestic supply, has continued to increase the pump price of the product in its retail outlets across the country. NNPCL recently hiked the pump price of petrol from N998 to N1,025 per litre in Lagos and in Abuja from N1,030 to N1,050 per litre.
Dangote, Marketers’ Clash
Marketers and Dangote Refinery are currently locking horns over the issue of supply and selling price.
President of Dangote Group, Aliko Dangote, had accused marketers of not coming forth to lift petroleum products from his refinery, claiming that it has enough stock of refined products and adequate capacity to meet local consumption needs.
In response, marketers said they were ever ready to buy petrol directly from the 650,000 barrels per day refinery but have not been given the opportunity to do so and threatened to resort to importation if the company continues to delay in granting their request for direct sales.
READ ALSO: Nigerians Question Dangote Refinery’s N990 Price As Fuel Hardship Deepens
The Independent Petroleum Marketers Association of Nigeria (IPMAN) and the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) claimed that they could import petrol at lower prices than what is being sold at Dangote Refinery.
Reacting to that, the Dangote Group in a statement by its Chief Branding and Communication Officer, Anthony Chiejina, said it is selling PMS to domestic marketers at N971 per litre through ships delivery and at N990 for those using trucks, adding that its prices are benchmarked against international prices and are competitive relative to the price of imports.
READ ALSO: We’re Selling PMS At N990/Litre, Dangote Reveals
Dangote further stated that if any marketer claims it can import petrol at a price cheaper than what the company is selling, “then they are importing substandard products and conniving with international traders to dump low quality products into the country, without concern for the health of Nigerians or the longevity of their vehicles.”
That was the first time Dangote Refinery revealed its petrol prices in Nigeria, two months after it commenced domestic supply of the commodity.
The company alleged that an international trading company recently hired a petrol depot next to its facility with the aim of using it to blend substandard products that will be dumped into the market to compete with products from its facility.
“This is detrimental to the growth of domestic refining in Nigeria,” the company warned, adding that domestic industries need to be protected to provide jobs and grow the economy.
Reacting to Dangote’s assertion, PETROAN in a statement on Monday, said the Dangote Refinery is inconsiderate for selling petrol at N990/litre, adding that company got massive concessions while accessing foreign exchange for procurement during construction.
In a statement signed by its Publicity Secretary, Joseph Obele, PETROAN insisted that it would sell petrol far less than N990 per litre if granted licence by the Nigerian Midstream and Downstream Petroleum Regulatory Authority to import.
The association also accused Dangote Refinery of scheming to achieve monopoly of the petroleum market in Nigeria, stressing that without competition, consumers will face exploitation in terms of prices.
On the insinuations that the marketers may import substandard products, Obele said it is a gimmick by Dangote to achieve its quest to have monopoly of the market. The PETROAN spokesperson said the association has concluded plans with its foreign financial partners to import the best quality PMS and sell cheaper than the current selling price in the country. He said: “We plan to enter the market before December 2024, pending the approval of our import permit licence by the regulatory agency and access to foreign exchange from CBN at the official rate.”
“The rate of N990 as announced by Dangote refinery was inconsiderate based on the fact that Dangote refinery enjoyed massive concessions for accessing foreign exchange during the construction of the refinery.
“The core determinant for setting the price is a consideration of the cost of production, then adding a fair margin. But this wasn’t the case for the determinant of PMS price by Dangote refinery as they said ‘the parameter was comparison with the international selling rate at the global market.”
Obele called on the Federal Government to do the needful in ensuring that monopoly does not exist in the petroleum market.
“A balanced market should be an all-inclusive market where the market leader is enjoying his lead, while the market challenger is servicing a certain degree of the consumers and the market followers are still surviving in the market at an affordable price.
“Therefore, it is penitent that the Federal Government should discourage and dismantle any attempt at monopoly in the downstream sector given crashing the current selling rate of PMS. The only catalyst to trigger PMS price reduction is by ushering in competition and PETROAN will support the Federal Government in achieving intensive competition in the sector.”
Aside from PETROAN, people in different quarters have also expressed fears about a possible monopoly by Dangote and the implication on fuel prices.
Former chairman of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Mr Peter Esele, called on the Nigerian government to step up regulatory efforts in the downstream sector of the petroleum industry to checkmate any trend that may affect consumers.
Esele, who is also a former president of the Trade Union Congress of Nigeria (TUC) made the call while reacting to the ongoing spat between Dangote Refinery and petroleum marketers over prices of the products.
He said the government needs to step in and strike a balance between profits and service to the people.
Mr Esele, who appeared on Channels Television Sunrise Daily on Tuesday morning, pointed out that what is going on between Dangote and marketers is “capitalists jostling for position in the market.”
The ex-PENSSAN Chairman stated that while Dangote should be appreciated for proving that refineries can still work in Nigeria, there is need for government intervention to ensure that a situation that rips off the consumers does not arise.
Allowing fuel import may put Pressure on Naira
There are concerns that allowing marketers to import petrol would put pressure on the naira. The oil and gas expert also echoed this concern, adding that there is no need to resort to importation when there is competent domestic capacity.
Domestic Supply and Price Stability
The notion about achieving a significant price drop with local production appears to have become a mirage, according to experts. Esele explained that since the price of petrol is determined by international market price, it is not going to be so cheap as Nigerians expect. He emphasised that because Nigeria has a weak currency, nobody should expect petrol to be so cheap.
The Ex-PENGASSAN/TUC head challenged PETROAN to tell Nigerians how they intend to procure best quality petrol from the international market and sell at a price far less than that of Dangote Refinery.
He urged government agencies in the downstream petroleum sector to step up efforts to properly regulate activities of players for the interest of consumers in the country.
Also, corroborating the fact that domestic production can’t significantly influence prices, CEO of Financial Derivatives, Mr Bismarck Rewane, said it can only guarantee adequate supply and quality of products.
Mr Rewane explained that there is a factor of cost of production and exchange rate among others.
“There is only two things we can achieve with the refinery. One is quality of the product, two quantity. Dangote Refinery or any other one including the Warri Refinery, cannot guarantee you price, because the price is not controlled by them. The price is determined by factors which include oil price, the exchange rate and other things,” Rewane stated in an interview on Channels Television Business Morning.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
