Dangote’s Petrol Price Slash 'Bad News' For Importers As They Face N75bn Monthly Loss
- Dangote Petroleum Refinery's most recent PMS price decrease might cost importers N2.5 billion every day on average
- The Dangote refinery's new ex-depot pricing for gasoline is N100 less than the typical landing cost
- Marketers may be compelled by the new Dangote price to sell gasoline much below their expenses
Legit.ng journalist Zainab Iwayemi has 5 years of experience covering the Economy, Technology, and Capital Market.
The most recent PMS price cut announced by the Dangote Petroleum Refinery may cost importers of Premium Motor Spirit (petrol) an average of N2.5 billion per day and N75 billion per month.
According to Punch's findings, the new ex-depot price of gasoline at the Dangote refinery is over N100 lower than the average landing cost of gasoline, as disclosed by industry participants.
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The new Dangote price may push marketers to sell petrol significantly below their costs, which comes at a huge cost.
As of last week, the landing cost of gasoline was N927 a liter, according to the Major Energies Marketers Association of Nigeria. This is N102 above the N825 ex-depot price of PMS at the Dangote refinery.
Over 50% of PMS consumption imported
The Nigerian Midstream and Downstream Petroleum Regulatory Authority recently reported that the country's daily PMS consumption was approximately 50 million liters.
According to the NMDPRA, local refineries are unable to supply up to 50% of the 50 million litres, hence, more than half of them are imported.
“Following Mr President’s withdrawal of subsidy, the announcement of May 29, 2023, we immediately saw a steep decline in consumption. And between then and as we speak, we have continued to do plus or minus 50 million litres a day. Of these 50 million litres averaging for each day, less than 50 per cent of that is contributed by domestic refineries. And so the shortfall by the PIA is sourced by way of imports.
“For clarity, what I am saying is that the contribution of local refineries towards sufficiency is less than 50 per cent,” the Chief Executive of the NMDPRA, Farouq Ahmed, declared.
It is possible to infer from the regulator's statements that importers and depot owners bring in roughly 25 million liters of PMS per day.
This will come to almost N23.18 billion if the 25 million liters of PMS arrive in Nigeria at a price of N927 per liter.
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With this new price, the Dangote refinery would have sold the same quantity of PMS at N20.63bn, leaving a difference of N2.5 billion daily.
Fuel importers said dealers might be compelled to sell below their cost prices as consumers would only buy from where petrol is cheaper.
Some of them claim that by recently lowering the price of gasoline and diesel, the Dangote refinery is gradually decreasing the appeal of importation.
The importers said that because they had to compete with others in the market, they have been able to sell the imported goods with little to no margin.
“Some of us who have imported PMS are feeling the heat of Dangote’s decision to slash prices. Though it is a good thing to reduce petrol price, it is taking a toll on our business. That’s the simple truth,” a dealer told Punch.
A different retailer mentioned that the Dangote refinery is lowering prices in an effort to discourage fuel imports, stating that many people will have to cease importing petroleum goods from other nations.
“Dangote understands the competition in the business and this latest reduction will further discourage fuel imports. There will be losses as we may have to drop our prices too. At the end of the day, some of us will source our products locally. I will just advise Dangote to create a level playing field for all,” the retailer stated.
Dealers will lose an average of N2.5 billion every day if they are forced by the current reality to sell PMS to marketers and owners of retail outlets for N825 each day. This will come to N76.5 billion in a month, and if it persists for a year, it will reach N918 billion.
The national publicity secretary of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike, confirmed that importers may incur losses as a result of the new price reduction.
Ukadike maintained that the price reduction would affect importers, stressing that Dangote was maximising the advantages of deregulation.
“Dangote may ‘kill’ fuel importers by this continued lowering of prices. All those importers who have challenged Dangote that they want to import cheaper fuel, as they’re just nearing the sea shore, Dangote will reduce the price and they will run into trouble,” Ukadike stated in his personal opinion.
Dangote slashes diesel prices by N55 after petrol adjustment
Legit.ng reported that Dangote Petroleum Refinery had once again reminded Nigerians that it has reduced the ex-depot (gantry) price of diesel to N1,020 per litre.
The new price was a N55 reduction compared to the previous price of N1,070 per litre.
The refinery, Africa’s largest, also announced that its ex-depot price for Premium Motor Spirit (PMS), also known as petrol, remained at N890 per litre, down from N960.
