Experts believe that petrol and diesel prices are unlikely to drop significantly despite the start of production at the Dangote Petroleum Refinery.
Following the removal of the petrol subsidy in May 2023, the price per litre of petrol surged from around N184 to over N600, depending on the location. Diesel prices also rose, reaching about N1500 per litre at retail outlets.
Petrol marketers are hopeful that the Dangote refinery’s production will lead to a significant reduction in petrol and diesel prices. However, experts argue that while the refinery is located in Lagos, Nigeria, the $20bn facility’s operation is heavily reliant on imports, and the fluctuating foreign exchange rates could limit any potential price decreases.
These insights were shared by Hector Igbikiowubo, Publisher of Sweet Crude Reports, and Ugodre Obi-Chukwu, Founder of Nairametrics, on “Inside Sources with Laolu Akande,” a socio-political program aired on Channels Television on Friday.
Igbikiowubo and Obi-Chukwu praised Aliko Dangote, Africa’s richest man, for overcoming numerous challenges to realize his vision of building a functional refinery. They highlighted that Dangote’s achievement demonstrates that the Federal Government has no excuse for not reviving the country’s four inactive refineries and urged the Nigerian National Petroleum Company (NNPC) Limited to increase crude supply to the private refinery.
Dangote recently mentioned that his refinery would continue to import 24 million barrels of West Texas Intermediate crude due to insufficient local crude production and supply from the state-run NNPC.
The experts concluded that while the private refinery won’t fully address Nigeria’s energy security needs, its operations will significantly improve the availability of premium petrol products in the country.
“The Dangote Refinery cannot solve the problem because the Dangote Refinery will continue to pay for crude oil in USD (United States Dollar),” Igbikiowubo said.
“The question now is how come the NNPC isn’t allotting all of its 445,000 barrels per day to the Dangote Refinery for refining? Why is it convenient to export crude oil when you have a facility like the Dangote Refinery up and running? You make more money if you export refined petroleum products than if you export crude oil.”
Obi-Chukwu agreed with Igbikiowubo that the dominance of the greenback in the operational cost of the Dangote Refinery might not necessarily lower the cost of the refined products for end users.
Obi-Chukwu said, “As much as the refinery is local, most of the input cost for that refinery is still going to be imported. Whether it is the personnel that will service the refinery. Whether it is the spare parts that will be changed and serviced. Even the crude itself is also being imported.
“A lot of the breakdown of the cost still has foreign components in there. So, it is quite unlikely that you might see a substantial amount of savings to the end consumers. Nevertheless, even if we get 10% savings, it is still better than what we currently have.”
The Lagos-based refinery, owned by billionaire businessman Aliko Dangote, began operations last December with a capacity of 350,000 barrels per day. It aims to reach its full capacity of 650,000 barrels per day by the end of the year.
The refinery has started supplying diesel and aviation fuel to local marketers, with petrol supply anticipated to begin by mid-July.
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