Financial Energy Review
……by Ben Ndubuwa….
In a significant move aimed at reducing the cost of Premium Motor Spirit (PMS) in the country, Dangote Petroleum Refinery announced on Sunday that it has slashed the price of petrol from N990 per litre to N970 per litre. This price slash is expected to ignite intense competition as both major energy marketers and the independents are now up to competition. This competition is partly occasioned by marketers purchasing the product directly from the refinery, marking a key development in Nigeria’s energy sector.
The announcement was made by Anthony Chiejina, the Group Chief Branding and Communications Officer of the Dangote Group, in a statement issued on Sunday. According to Chiejina, the price reduction is a gesture of appreciation to Nigerians as the year draws to a close.
“As the year ends, this is our way of appreciating the good people of Nigeria for their unwavering support in making the refinery a dream come true. In addition, this is to thank the government for their support, as this will complement the measures put in place to encourage domestic enterprise for our collective well-being,” Chiejina said.
The move to lower petrol prices comes at a time when Nigerians have been grappling with soaring fuel costs, which have contributed to inflation and rising transportation costs. By reducing the price of petrol, Dangote Refinery aims to provide some relief to the public while simultaneously strengthening its position in the highly competitive oil and gas market.
Despite the price reduction, Chiejina assured Nigerians that the refinery would not compromise on the quality of its petroleum products. He emphasized that Dangote Petroleum Refinery is committed to ensuring that its products are environmentally friendly, sustainable, and of the highest quality.
“We are determined to keep ramping up production to meet and surpass our domestic fuel consumption; thus, dispelling any fear of a shortfall in supply,” Chiejina added in the statement.
The price reduction is also expected to have a ripple effect on the larger petroleum industry. On Friday, the Major Energy Marketers Association of Nigeria (MEMAN) revealed that the landing cost of imported petrol had dropped to N971 per litre, further contributing to a reduction in the cost of petrol.
Marketers, both independent and major, have already confirmed that pump prices for petrol have started decreasing in many parts of Nigeria due to the competition brought about by the deregulation of the downstream oil sector. The deregulation policy has allowed market forces to play a greater role in determining fuel prices, which has led to a gradual reduction in prices at petrol stations.
Chinedu Ukadike, the spokesman for the Independent Petroleum Marketers Association of Nigeria (IPMAN), highlighted the positive impact of the agreement between Dangote Refinery and his association. According to Ukadike, the partnership is already leading to price reductions across the country.
“By just the announcement that IPMAN and Dangote have met and are ready to transact business, the prices of products have crashed. You would have noticed the drop in prices by N10, N15, or so, and this is due to competition,” Ukadike explained.
He further noted that independent marketers are no longer reliant on middlemen to source their products. Instead, they can now purchase petrol directly from the Dangote Refinery, which is expected to drive prices down even further as competition intensifies in the market.
“Independent marketers are no longer buying from middlemen. We are going to be buying directly from the producer. So, the competition is setting in. I also want to tell you that before the end of this year, the price will not be as high as what you see now,” Ukadike added.
The price reduction has already led to a noticeable drop in fuel prices across several regions in Nigeria. Independent marketers have reported seeing prices fall by N10 to N15 per litre, and many expect this downward trend to continue as the competition intensifies.
A major oil marketer also confirmed that the price reduction is linked to the ongoing deregulation of the downstream sector. The marketer, who preferred to remain anonymous due to lack of authorization to speak on the matter, explained that the increased competition has been driving down prices without the need for official announcements.
“People are not noticing that prices are going down, primarily because there are no big announcements. Deregulation is in full swing, and competition is the order of the day,” the source stated.
Despite the reductions in some areas, fuel prices are still above the N1,000 per litre mark in many parts of Nigeria. Some filling stations have been selling petrol at rates as high as N1,070 per litre. When asked about this discrepancy, a dealer in one of the major oil companies explained that price fluctuations are normal in a deregulated market.
“Last week it was N1,080 in some filling stations, if you were observant. You may not see N900; that is below cost. Just stop expecting a permanent fixed price. It can come down and it can go up,” the dealer stated.
This fluctuation in fuel prices underscores the challenges Nigerians face in dealing with the unpredictable nature of the petroleum market. However, the price cuts from Dangote Refinery and the increased competition among marketers have sparked optimism that petrol prices will continue to fall, providing much-needed relief for consumers.
The reduction in fuel prices is expected to have a wider impact on the Nigerian economy, which has been grappling with inflation and rising costs of living. Lower fuel prices could help reduce transportation costs, thereby making goods and services more affordable for Nigerians.
As Dangote Refinery ramps up production and continues to supply local markets directly, industry observers believe that the country may be on the cusp of a more competitive and sustainable oil sector. The ultimate test, however, will be whether these price cuts lead to a long-term decrease in fuel costs across the country.
For now, Nigerians are holding onto hope that the Dangote Refinery’s efforts will drive prices lower and help stabilize the volatile petroleum market. With competition heating up, the future of the oil sector appears to be heading in a more consumer-friendly direction.
