The pump price of Premium Motor Spirit (PMS), commonly known as petrol, is projected to see a substantial decrease in Nigeria, thanks to the upcoming massive production by the Dangote Petroleum Refinery and other indigenous producers. This potential reduction comes with a caveat: the government must ensure an adequate supply of crude oil to local refiners. Operators of modular refineries have stressed that foreign refineries are currently profiting significantly from Nigeria’s dependency on imported petroleum products.
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Join the GamePromising Outlook from Local Refiners
Under the aegis of the Crude Oil Refinery Owners Association of Nigeria (CORAN), local refinery operators have expressed optimism that the price of petrol will drop considerably once domestic production ramps up. Eche Idoko, Publicity Secretary of CORAN, highlighted the transformative impact that the Dangote Refinery has already had on diesel prices in Nigeria. He stated, “If we begin to produce PMS today in large volumes, provided there is adequate crude oil supply, I can assure that we should see a significant drop in petrol prices.”
Idoko emphasized the absurdity of Nigerians paying nearly N700/litre for petrol when local production could slash these costs. He questioned, “Is it because you want to satisfy the global refiners abroad that are making so much from us?”
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Economic Implications and Government’s Role
The discussion around the feasibility of such a price drop often hinges on the pricing of crude oil, which is traded in dollars. Despite this, Idoko is confident that local production will lead to lower petrol prices. He cited the example of diesel prices, which dropped from N1,700-N1,800/litre to N1,200/litre after the Dangote refinery commenced operations. He believes similar effects will be seen in petrol prices once local production scales up.
Furthermore, Idoko argued for the sale of crude oil to local refiners at the naira equivalent of the dollar rate. This, he posits, would bolster the country’s economy and strengthen the naira. “Strengthen the naira. We will buy at the international market rate, but at a naira equivalent,” he urged the government.
The Dangote Refinery’s Role
Aliko Dangote, Africa’s richest man, has confidently stated that Nigeria will cease importing petrol by June this year, thanks to his refinery’s capabilities. Dangote assured that his facility could meet the petrol, diesel, and aviation fuel demands of not just Nigeria but the entire West African region.
The Dangote refinery has already demonstrated its influence by reducing diesel prices significantly. However, due to exchange rate fluctuations, maintaining these lower prices has been challenging. Idoko explained that while the refinery initially lowered diesel prices to below N1,000/litre, the rise in exchange rates necessitated a return to the N1,200/litre mark.
Modular Refineries and Future Prospects
Nigeria currently has 25 licensed modular refineries, with five in operation producing diesel, kerosene, black oil, and naphtha. Many of the remaining refineries are facing challenges due to the unavailability of crude oil, which has also stalled funding from financiers. Idoko explained that financiers require guarantees of feedstock availability before committing to funding refinery construction.
Oil marketers are equally optimistic about the reduction in petrol prices with the commencement of local production. Abubakar Maigandi, National President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), expressed hope that the Dangote refinery’s petrol prices would be lower than those of the Nigerian National Petroleum Company Limited (NNPC).
Regulatory Support and Assurance
The Nigerian Midstream and Downstream Petroleum Regulatory Authority has guidelines for providing feedstock to indigenous refiners, ensuring consistent supply of crude oil to domestic refineries. Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, has reiterated the government’s commitment to supplying crude oil to domestic refineries. This is in line with the provisions of the Petroleum Industry Act 2021, which aims to foster seamless implementation of the Domestic Crude Oil Supply Obligation.
Conclusion
The commencement of massive local production by the Dangote Petroleum Refinery and other indigenous producers is poised to reduce petrol prices in Nigeria significantly. With the government’s support in ensuring adequate crude oil supply and implementing favourable policies, Nigerians could soon enjoy more affordable petrol. This development promises economic relief for consumers and marks a significant step towards energy self-sufficiency for the nation.
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