‘Real reason petrol, diesel prices may not drop despite Dangote Refinery’

Experts suggest that petrol and diesel prices may not see a significant decline despite the start of production at the Dangote Petroleum Refinery.

Following the removal of petrol subsidies in May 2023, prices soared from approximately N184 per litre to over N600, depending on the region. Diesel now retails for about N1500 per litre.

Although the $20 billion Dangote Refinery is located in Lagos, Nigeria, the high import-dependent operational costs and volatile foreign exchange rates might prevent a notable reduction in the prices of these essential fuels.

These insights were shared by Hector Igbikiowubo, Publisher of Sweet Crude Reports, and Ugodre Obi-Chukwu, Founder of Nairametrics, during the socio-political programme “Inside Sources” with Laolu Akande on Channels Television.

Both Igbikiowubo and Obi-Chukwu praised Aliko Dangote for overcoming significant challenges to establish the refinery. They emphasized that the Federal Government should take this as a cue to revive Nigeria’s four dormant refineries and called on the Nigerian National Petroleum Company (NNPC) Limited to increase crude supply to the Dangote Refinery.

Dangote recently announced that the refinery would continue importing 24 million barrels of West Texas Intermediate crude due to insufficient local production and supply from the NNPC.

The experts noted that while the private refinery would not entirely resolve Nigeria’s energy security issues, it would significantly improve the availability of premium petrol products.

“The Dangote Refinery will continue to pay for crude oil in USD,” Igbikiowubo said. “Why isn’t the NNPC allocating all of its 445,000 barrels per day to the Dangote Refinery for refining? Exporting crude oil instead of refined products is less profitable.”

Obi-Chukwu added, “Despite being local, most operational costs for the refinery are import-dependent. This includes personnel, spare parts, and even some of the crude oil. Therefore, significant savings for consumers are unlikely, although even a 10% reduction would be an improvement.”

The refinery, which began operations last December with a capacity of 350,000 barrels per day, aims to reach 650,000 barrels per day by the end of the year. It has started supplying diesel and aviation fuel, with petrol supply expected to begin in mid-July.

The experts stressed the need to get Nigeria’s four state-owned refineries operational to ensure energy security. These refineries, located in Kaduna, Port Harcourt, and Warri, have remained inactive despite significant investment in their maintenance.

Igbikiowubo argued that the new administration should prioritize making these refineries functional. He pointed out that although the NNPC has a 20% stake in the Dangote Refinery, it does not equate to state ownership.

“We need a coherent energy security strategy. Functional refineries are crucial,” he said. He also expressed skepticism about privatization, noting that it often prioritizes profit over public access to affordable fuel.

Obi-Chukwu suggested that privatization could work if implemented correctly, with clear mandates and performance indicators. “We’ve seen government-run refineries fail, leading to misappropriation of funds. Privatization should be done properly, with transparency and accountability,” he said.

Both experts urged the government to establish policies that would support the success of private businesses in Nigeria.

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