The Crude Oil Refiners Association of Nigeria has expressed optimism that with appropriate interventions from the Federal Government, the pump price of petrol produced by the Dangote Petroleum Refinery could significantly drop to below N600 per litre.
This was disclosed by the association’s Publicity Secretary, Eche Idoko, during an interview with The PUNCH.
He asserted that CORAN remains confident that domestic refineries like Dangote’s can contribute to reducing the cost of Premium Motor Spirit (PMS).
Idoko explained that the current price of N898 per litre, which the Nigerian National Petroleum Company Limited.claims to have paid for petrol from the Dangote refinery, is largely influenced by the high exchange rate.
He suggested that the price could fall to around N550 if the exchange rate is pegged at N1,000 to the dollar for locally produced petroleum products.
He clarified that the PMS currently being sold by the Dangote refinery is produced from crude oil purchased in both local and international markets, with transactions conducted in dollars.
“This particular batch of product that is being sold by Dangote, the crude was purchased in June at the international price,” Idoko noted.
He further explained that while NNPCL supplied 60% of the crude oil, the remaining portion was imported by the Dangote refinery at international market rates, necessitating the sale of the refined product at global prices.
Idoko emphasized that even at N898 per litre, the NNPC is purchasing the product at a cost N300 below the typical landing cost of nearly N1,200 per litre.
He elaborated, “The pricing that you are seeing now is a reflection of what the international price is, less the cost of freighting. NNPC was buying the product at N300 less; they’re paying N300 more for the product they were importing than what they are buying from Dangote at N889.”
He argued that a naira-based sale of crude oil would release approximately 40% of the nation’s foreign exchange, currently allocated to importing petroleum products.
This, according to him, would lead to an appreciation of the naira against the dollar, which would, in turn, reduce the cost of petrol without the government having to subsidize the price.
Idoko advised the Federal Government committee working on crude oil sales to local refineries to consider selling crude feedstock in naira at a discounted rate and to peg the exchange rate for these transactions at around N1,000 to a dollar. He suggested that this approach could lead to a significant reduction in petrol prices.
He further noted, “If the financial sector is sincere, we should see an immediate climb by the naira against the dollar. And if the naira climbs against the dollar, without even the government pegging the price of the exchange rate for dollars in the pricing of that group, we will see a reduction in the price automatically.”
He suggested that the committee is still working on finalizing its recommendations. He acknowledged concerns about potential monopolistic practices by Dangote but assured that Dangote, being a member of CORAN, would comply with the association’s regulations.
He also highlighted the role of the Nigerian Midstream and Downstream Petroleum Regulatory Authority as a regulatory body to prevent any form of monopoly in the market.
Idoko criticized the imposition of levies and taxes on PMS prices by the NMDPRA, noting that 25-30% of the cost of PMS comprises government levies.
He called for a reconsideration of these fees, especially during a time when Nigerians are struggling with reduced purchasing power.
He concluded by saying, “This is different from paying money as a subsidy. You are only just putting mechanisms in place to ensure the product is cheap.” He provided a detailed analysis of the current pricing, explaining that the cost per litre of Dangote PMS is $0.52, translating to N842.61 when calculated at an exchange rate of N1,637 to a dollar. He argued that this price would have been around N520 per litre if the exchange rate was fixed at N1,000 per dollar.
Idoko also suggested that the Federal Government could set the exchange rate at N1,000 for 36 months, after which the policy could be reviewed.
“The crude belongs to the people now, and it’s NNPC’s crude. NNPC can give the crude for local refining at $1,000. You refine, the NNPC collects everything and stores it. The NNPC needs a strategic storage arrangement. We have depots in almost all the states in Nigeria. Load those depots with PMS for the rainy day,” he said.
On Monday, NNPCL announced that petrol lifted from the Dangote refinery would be sold at prices above N1,000 per litre in the northern regions.
The highest price, according to NNPCL spokesperson Olufemi Soneye, would be N1,019 per litre in Borno State and N999.22 in Abuja, Sokoto, Kano, and other states. The lowest price would be N950 in Lagos and its environs.
Meanwhile, the Dangote Group had contested NNPCL’s earlier claim of an N898 per litre price, calling it misleading. Anthony Chiejina, the Group Chief Branding and Communications Officer, urged Nigerians to disregard the statement and await an official announcement from the Technical Sub-Committee on Naira-based crude sales to local refineries, which will start on October 1, 2024. He clarified that the PMS sold to NNPCL was priced in dollars, offering significant savings compared to the company’s previous imports.
