To start with, before the twin policies of fuel subsidy removal and exchange rates unification by the President Bola Tibunu administration, the official price of petrol (PMS) was about N192, Diesel (AGO) N850, kerosene (DPK) N1,100, aviation fuel (Jet-A1) N700, and cooking gas (LPG) about N750.
After the implementation of the said policies, the price of petrol went to slightly above N600 and remained there for quite some time despite the immediate “consequences” of the policy of the exchange rate unification in the foreign exchange market which led to the free “fall” in the value of naira from the official rate of N414 to above N1,900 in the parallel market.
Within the same period, the price of diesel increased from about N850 to about N1,700; kerosene from N1,100 to about N1,450; aviation fuel (Jet-A1) from N700 to about N1,500; and cooking gas from about N750 to about N1,200. Those who know the parameters in the market know too well that there was no “magic” whatsoever that could have retained the price of petrol unchanged as we had it unless subsidies were paid whether officially or otherwise.
Experts in the oil and gas sector will not but agree with me that had the petrol price been truly cost reflective without any form of subsidy after its acclaimed removal its price would have since been competing with those of diesel, and kerosene prices, etc. Subsidies were removed in all the by-products of crude oil, such as: diesel, kerosene, aviation fuel, and cooking gas, etc., by the previous governments, but attempts at petrol subsidy removal by succeeding governments at various times were largely resisted.
However, In my thought, the present shortage and or scarcity of petrol is a process of its actual cost reflective pricing free from any form of subsidy by the government ahead of the eminent entry of Dangote Refinery into the industry. Dangote Refinery will very soon start supplying petrol to the market. The entry of Dangote Refinery into the industry may not bring the cost of fuel below N600 as some people think because the price we have been paying for the product was not cost reflective if one takes the exchange rate into consideration.
It is apt to state that, with Dangote Refinery the cost of diesel and aviation fuel reduced because there were no subsidies on them, the consumers paid cost reflective prices on them. For petrol, is a different story. The price of petrol may not go back to pre-May, 2023 or N600 because cost reflective price has not been charged for petrol.
In my thought, the reduction of the price of diesel from about N1700 to about N1,100 occasioned by improvement in the value of the naira against the dollar and the recent entry of Dangote Refinery into the market is a huge relief to the economy. Almost 98% of our heavy duty trucks which move all kinds of goods to various destinations for our consumption use diesel as fuel. Most of our local industries use diesel for their operations while most of our private cars use petrol. If the price of diesel stays at its present price or goes lower we will likely see its impact on the prices of goods and services.
Few days to the end of the President Olusegun Obasanjo administration in 2007, 51% stake of our moribund Kaduna and Port Harcourt refineries were privatised to a business consortium led by Alhaji Aliko Dangote with the aim of resuscitating them for local refining, but soon after the late President Musa Yar’Adua took over, he revoked the transaction. It is interesting to note that Dangote was granted private refinery license by the the immediate-past President Muhammadu Buhari administration which he built from the scratch. The federal government under president Buhari bought 20% stake through the Nigeria National Petroleum Company Limited, NNPCL. It is worth noting that, 20% of whatever will be generated by the refinery will go to the Nigerian government.
Our optimism about the refinery is that it is expected that it will have a double barrel positive impact on Nigeria’s economy by reducing our dollar demand for the importation ot refined petroleum products and increase dollar supply from the export of its excess refined petroleum products. If this happens it will strengthen the naira against the dollar which hopefully will benefit the economy.
The refinery’s 650,000 barrel production capacity is about 120 million litres, which is more than our about 50 million litres local demand daily. It is expected to meet 100 per cent of our petrol consumption requirement when fully operational. It is projected to save Nigeria up to $10 billion in foreign exchange and generate another $10 billion in exports. It will save Nigeria about $9 billion a year from importing refined petroleum products.
May God bless Nigeria!
Nurudee Dauda,
Kaduna Kaduna state