The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has raised concerns over the Dangote Refinery’s pricing strategy for petrol, arguing that it should be sold below market price given the current cost of production.
According to PETROAN, the Nigerian government’s recent decision to sell crude oil to the Dangote Refinery in naira should lower the cost of petrol production.
Dangote Refinery which began product earlier this year revealed last week that it was selling petrol at N990 per litre for loadings done by trucks. It came amid rising public concern and criticism that the refinery’s pricing is contributing to the high cost of fuel across the country.
Speaking on Nigeria Info FM 99.3 on Tuesday, PETROAN’s National Public Relations Officer, Joseph Obele, stated that the cost of producing petrol domestically is now estimated to be below N600 per litre. This claim was first reported by Sahara Reporters.
“Scholars of oil sectors have done an analysis,” Mr Obele noted, “and the analysis has shown that the crude for naira given to Dangote by the Federal Government, cost of production will not go above N600, less than N600.”
Mr Obele further argued that the Dangote Refinery should not base its prices on international market rates but rather on the local cost of production, especially given the subsidies and concessions the company has received.
“But it is wrong for him to say his template for him to fix his refinery selling price is based on and tied to how much the international community is selling. People are saying the dynamics and the effects and the economic systems at the international market and Nigeria are not the same,” Mr Obele stated.
He argued that “Dangote should not have fixed his price on the international market. He should have fixed his price on cost of production plus the margin.”
The PETROAN official also referenced the concessions the Dangote Refinery received from the government during its construction, including a favourable foreign exchange rate.
“While he was building his refinery, the concession he was given for foreign exchange was far less than the official rate,” he said, adding that such allowances should logically translate into more favourable pricing for the Nigerian market.
He argued that “it is wrong for him to say, ‘I templated my price based on the international market,’ in a country where inflation is high, where the minimum wage is poor, and where PMS pricing impacts every other commodity.”
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On Monday, the Nigerian National Petroleum Company Limited (NNPCL) announced it has ended its long-standing practice of importing refined petroleum products, now opting to source fuel from local refineries, including the Dangote Refinery.
NNPCL’s Group Chief Executive Officer, Mele Kyari, confirmed this during the Nigerian Association of Petroleum Explorationists conference in Lagos.
“Today, NNPC does not import any product, we are taking only from domestic refineries,” he said. “From day one, we knew that it is to our benefit to supply crude oil to the domestic refinery, so we don’t need to be persuaded; we don’t need anyone to talk to us.”
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