On Tuesday, the Dangote Refinery announced the commencement of production of petrol, commonly known as Premium Motor Spirit (PMS). This development has been met with widespread enthusiasm across various sectors of the Nigerian economy, heralding a new era for the country with potential benefits. With the country’s dependence on imported fuel and the ongoing challenges faced within the sector, the refinery’s operation brings promising prospects for fuel security, economic growth, job creation, and overall national development. However, alongside the optimism, there are legitimate concerns regarding pricing strategies and the affordability of petrol for ordinary Nigerians, raising the crucial question: will the benefits of refined petrol reach the average citizen?
While making the announcement, the President of Dangote Group, Alhaji Aliko Dangote revealed that the refinery is set to start selling petrol to the Nigerian public. But, government will fix the price and Nigerian oil company, NNPCL, will be the exclusive buyers.
The NNPCL reached an agreement with Dangote to supply him crude in Naira. And this month the refinery will supply NNPCL 25million litres of fuel, and 30million next month. The refinery is expected to produce 650,000 barrels per day. The NNPCL being exclusive buyers means that, it will purchase petrol from Dangote on an agreed price and sell the product to Nigerians at a rate it deems fit. And, shockingly, few hours after the announcement, NNPCL speedily hiked the petrol price to N855/litre in Lagos and N897 in Abuja to the chagrin of Nigerians who are enduring an excruciating fuel scarcity and snarling long queues at filling stations for eight weeks.
I am simply baffled as there’s no any plausible explanation for the recent petrol price increase by NNPCL. Does the Petroleum Act provide that it must play the role of a middleman between Dangote and the consumers or petroleum marketers?
Understandably, the NNPCL is in serious international debt with no international supplier willing to supply them petrol, but Nigerians should not bear the brunt and burden of its indebtedness. If crude oil is sold in Naira to Dangote refinery, Nigerians should benefit immensely with lower pump rates.
It baffles me that even with no impediments such as landing costs, port charges, Custom duty, forex impediments, yet NNPCL will increase PMS price by 200 per cent. This is sheer wickedness.
It’s generally anticipated that with the Dangote Refinery, technically the largest in Africa and one of the largest globally, coming on stream with local production of petrol, it will help stabilize prices in the domestic market and potentially alleviate Nigeria’s long-standing fuel import reliance, which has seen the nation grapple with foreign exchange challenges and fluctuating global oil prices.
Now, the previously persistent question of petrol availability in Nigeria seems to have found a resolution. This significant development marks a turning point in the country’s energy landscape, providing a tangible solution to fuel shortages that have long plagued citizens and industries alike. However, despite the promising capacity of the refinery to supply enough petrol to meet local demand, the issue of high prices set by the government poses a considerable challenge. The juxtaposition of abundant availability against the backdrop of soaring prices raises critical questions about the refinery’s impact on the Nigerian economy and the everyday life of its citizens.
In this light, the issue of availability has been significantly alleviated. Long queues at petrol stations, which had become a pervasive sight across the country, are now diminishing. The refinery represents not just a source of petrol but also a symbol of Nigeria’s potential to harness its natural resources for domestic benefit.
As the Dangote Refinery begins production, consumers and industry stakeholders are apprehensive about the pricing structure that will be implemented.
It is essential to consider that the refinery itself was initially established as a response to rampant fuel shortages and incessant price hikes. Thus, there is great anticipation that the pricing of PMS will be fair and accessible to the average Nigerian. However, I am not oblivious of the fact that the refinery’s pricing strategy could hinge significantly on some factors such as operational costs, crude oil prices, distribution expenses, and government tax policies. But consequently, government should not set high prices that do not reflect the basic reality if Nigerians were buying imported PMS at N640 to N750 per litre, accompanied with all impediment costs and encumbrances, they should not be forced to now pay inflated price for locally produced PMS.
As the commencement of PMS production at Dangote refinery is expected to create jobs within and ancillary industries, catalyzing economic activities in various sectors, including transportation, agriculture, and manufacturing, the affordability of petrol remains a significant concern for many Nigerians. The country has witnessed a general trend of rising living costs, widening the gap between income and expenses for the average citizen.
The Nigerian National Bureau of Statistics (NBS) has frequently reported concerning levels of inflation, particularly in food and transportation sectors, which directly affects the affordability of petrol. For many Nigerians earning minimum wage or subsisting on informal employment, the expenses associated with fuel are exorbitantly high, which can lead to a decline in living standards. Should the refinery price petrol beyond what Nigerians can reasonably afford, it could exacerbate existing socio-economic disparities in the country. It is essential for the government and stakeholders to work collaboratively with the Dangote Group to establish pricing frameworks that both reflect the costs of production and ensure that fuel remains accessible and affordable to all Nigerians.
In this context, the role of the government in regulating prices and ensuring market stability cannot be overstated. Historically, Nigeria has grappled with the challenge of subsidy policies that, while intended to make fuel affordable, have often resulted in fiscal strains, corruption, and inefficiencies. The deregulation of the petroleum sector has been a contentious topic, as stakeholders argue about the balance between market-driven pricing and government intervention.
As the Dangote Refinery begins operations, the government must navigate these complex dynamics prudently. Policymakers need to consider mechanisms that will not only protect consumers from exorbitant pricing but also encourage the sustainability of the refinery’s operations. Regulatory frameworks can include monitoring pricing strategies and ensuring openness in pricing, while simultaneously creating an environment that supports further private sector investments in fuel production and distribution.
The Dangote Refinery represents a transformative chapter in Nigeria’s economic narrative. The potential to enhance fuel security, generate employment, and stabilize the economy is undeniably significant. However, to translate this optimistic vision into reality, critical concerns regarding pricing and affordability must be addressed earnestly.
Our focus as a nation should remain on creating an inclusive environment that ensures the benefits of local petrol production resonate down to the ordinary Nigerian. Ultimately, the success of the Dangote Refinery—and by extension, the broader Nigerian economy—will depend on its ability to balance the imperatives of profitability and public welfare, ensuring that the promise of local petrol production is realized for all.
