New price template: Petrol to sell in Borno N1,019/ litre, Lagos N950, Nigerians angry

The petrol pricing war between Dangote Refinery and Petrochemical Company, and the Nigerian National Petroleum Corporation Limited (NNPCL), Monday, went a notch higher with the national oil company releasing a full  pricing template  Nigerians should expect  across the country.

The lowest price, as shown in an infographic released by the NNPCL, is N950 in Lagos and its environs, while it sells for as high as N1,019.22 in the far north of Borno and others.

The NNPCL had, Sunday afternoon, announced that it had commenced loading of its trucks at the 650,000-per day capacity refinery at  Ibeju-Lekki, Lagos state.

He also disputed the claim that the NNPCL purchased the product at N760 per litre, saying “for this initial loading, the price from the refinery was N898 per litre.”

…Dangote speaks

Angered by this disclosure, the Group Chief Branding and Communications Officer of Dangote Group, Anthony Chiejina, faulted the claim, reiterating that  the price of its product would be determined by a committee set up by President Bola Ahmed Tinubu.

 Chiejina, in a statement Sunday, said: “This statement is both misleading and mischievous, deliberately aimed at undermining the milestone achievement recorded today, September 15, 2024, towards addressing energy insufficiency and insecurity, which has bedeviled the economy in the past 50 years.

“We urge Nigerians to disregard this malicious statement and await a formal announcement on the pricing, by the Technical Sub-Committee on Naira-based crude sales to local refineries, appointed by His Excellency, President Bola Ahmed Tinubu GCFR, which will commence on October 1, 2024, bearing in mind that our current stock of crude was procured in dollars.”

…The pricing template

On claims that the government would fix the price, Soneye said: “The NNPC Ltd has released estimated prices of Premium Motor Spirit, also known as petrol (obtained from the Dangote Refinery) in its retail stations across the country.

 “The NNPC Ltd also wishes to state that, in line with the provisions of the Petroleum Industry Act (PIA), PMS prices are not set by Government, but negotiated directly between parties on an arm’s length.

“The NNPC Ltd can confirm that it is paying Dangote Refinery in USD for September 2024 PMS offtake, as Naira transactions will only commence on October 1st, 2024.

“The NNPC Ltd assures that if the quoted pricing is disputed, it will be grateful for any discount from the Dangote Refinery, which will be passed on 100% to the general public.

“Attached to this statement are the estimated pump prices of PMS (obtained from the Dangote Refinery) across NNPC Retail Stations across the country, based on September 2024 pricing.”

In the latest pricing template attached to the statement by Soneye, petrol from Dangote Refinery for September will sell for N950.22 in Lagos State, which is the lowest, and N1,019.22 in Borno State, the highest.

In Oyo and Ogun states, the commodity will go for N960.22 per litre, while the Federal Capital Territory, Abuja and Sokoto, Kaduna and Kano States have a price template of N992.22, and those in Rivers and Imo states are expected to pay N980.22 per litre.

…Nigerians angry

Meanwhile, Nigerians have described the new pricing for pump price of petrol as outrageous, saying that the hope for cheaper petrol had been dashed. 

They said the pricing template would only further increase the cost of living in the country. 

Since May 29, 2023 when President Bola Tinubu said ‘subsidy is gone’, the cost of living has skyrocketed largely fueled by transport costs as petrol price moved from N197 to over N600 before settling at N898. 

In a telephone interview with Blueprint, a development researcher, Adefolarin Olamilekan, said the new pricing template would only further aggravate cost of living and doing business. 

Blaming the present situation on the inaction of successive administrations to fix the country’s four refineries, Adefolarin said transportation, food commodity, service provision and operational cost expenses for both large, small and medium businesses, would hit the rooftop. 

“It’s so sad that we are confronted with such a situation. Unfortunately, many Nigerians believed that local refining of crude into PMS would make its price affordable and accessible, rather the case is different. 

“Painfully, poor Nigerians have to bear the brunt of this business and economic action,” Adefolarin said.

As things stand, the economist said, “The pricing is an indication that deregulation is going to cater for the poor. 

“First the federal government may have to constitute a presidential committee to work on reviving the four national refineries.

“Secondly, we need bigger refineries to compete with Dangote Refinery for a level playing field in the process of bringing down PMS price. Lastly, the CNG buses for mass transportation across big cities need to be speed up to cushion the impact on the urban and semi urban transport economy.”

…New pricing not healthy

Also speaking, Executive Director Save the Consumer Initiative Aliyu Ilias told this newspaper that the new pricing  is not a healthy one for Nigerians. 

According to Ilias, it’s going to be much more difficult for Nigerians because the purchasing power is not there.

“The petrol among other energy, is high, taking most of our income. If you look at it now, apart from spending so much on food, another thing you spend money on is also transportation which is not helping. The more we spend on transportation the more it becomes difficult to cater for other needs. 

“Then the new pricing template is quite surprising. I am sure this pricing template is for NNPCL. So, if NNPCL is selling N992.22 in Abuja, how do we want the marketers to sell their own? It’s quite sad. 

“The federal government needs to realise that there is a need for energy security because that will give the economy a better stand and increase people’s purchasing power,” he told Blueprint.

Continuing, Ilyas said: From the way things are, it seems NNPC Ltd and Dangóte do not have a good agreement. Ideally, Dangote is supposed to sell to marketers and marketers sell to Nigerians. It appears Dangote wants to collect a particular amount, maybe at this N992, but maybe Dangote is expecting the federal government to cushion the balance, something like subsidy. I think it’s not a healthy one for Nigerians,” he added.

Also in his reaction, a resident of Jikwoyi, a suburb of the FCT, John Yahaya,  expressed dismay that despite local refining of the petrol, the price was still high.

…Why Dangote petrol can’t be cheap – Analyst

 In his intervention, a public affairs analyst, Etim Etim, while commending the NNPCL for coming clean on the pricing template, highlighted a couple of reasons that would make Dangote petrol high, contrary to expectations of Nigerians.

In an article titled ‘Why Dangote petrol can’t be cheap,’ he said: “NNPC will make a margin of N26.58 per litre after incurring a distribution cost of N15/litre, an inspection fee of N97/litre, and an NMDPRA fee of N8.99/litre. On Sunday, NNPC had told us that it purchased petrol at N898/litre (it actually paid 55 cents/litre) from Dangote.

“I commend NNPC for these disclosures, and I should note that these prices are only obtainable for the month of September when NNPC is buying in dollars from the refinery. For October, when crude would be sold in Naira, the prices may change, depending on a few variables like the exchange rate and the crude oil price in the international market.”

On reasons for the high cost, he said: “Clearly, the downstream market is now fully deregulated, and for the first time in our history, subsidy is truly gone. Nigerians should brace up for a market-determined pricing structure that would be influenced by a few factors: price of crude oil; exchange rate; cost of refining; overheads; borrowing costs; and insurance. Crude oil price will continue to be a major determinant of petrol price. Even when NNPC sells crude in Naira to DR, the pump price would still be determined by the prevailing exchange rate. If the naira continues to slide, petrol prices will increase, even if other factors remain unchanged.

“This morning, crude oil is selling at about $72, and at the exchange rate of N1,600/dollar, Dangote would be buying a barrel of crude oil at about N115,200. Although there are many other products that are obtained from a barrel of crude oil, petrol will not come cheap because of other inherent costs in the production process. Dangote is highly indebted to Nigerian banks, and even before his refinery began production, he was already repaying and servicing his debts. He had told the media in July that he had incurred huge interest charges due to failed attempts at land acquisition in Ogun State and delays in construction in Lagos State due to communal issues. The accumulated interest charges and other interest costs will count in the pricing of his gasoline.

“I am sure that the refinery is fully insured by foreign insurers, and huge premiums are paid yearly in dollars. According to loss adjusters in the United States, a refiner worth $1 billion will likely pay a yearly insurance premium of $2.5 million or more. You can imagine what Dangote Refinery, the world’s largest single-train refinery, worth about $20 billion, will pay every year as a premium. This will also be factored into its pricing structure.

“Dangote’s costs of production must also be very high, and this will impact heavily on the pricing of its products. The refinery provides everything for itself, including building three ports within the complex for its use in bringing in heavy equipment and building a huge 400 MW power plant to provide its own electricity. In addition, DR has over 8,000 people on its payroll. During construction, 29,000 Nigerians and 11,000 expatriates worked at the site. The huge wage bill would have to be taken care of by the selling prices of the products.”