There are indications that the Federal Government committee responsible for implementing the sale of crude oil to local refineries in naira will soon address the pricing of Premium Motor Spirit (PMS), commonly known as petrol, to be released by the Dangote Petroleum Refinery next month.
Multiple sources, including oil marketers and members of the Implementation Committee on crude oil sales in naira—led by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun—confirmed that the panel would hold a series of meetings in the coming weeks to discuss the development.
The committee is expected to finalize a framework that will set a benchmark for the amount the Dangote refinery will pay for crude oil in naira. The Federal Government must also decide whether to subsidize the petrol produced by the Dangote refinery or allow Nigerians to purchase the product at the market price.
However, oil marketers have expressed concerns that the cost of petrol from the Dangote refinery will likely be higher than the current pump prices, making it difficult for dealers to buy the product unless the government intervenes.
Currently, petrol is sold between N600 and N700 per litre across Nigeria, but the landing cost is approximately N1,117 per litre, according to recent data from the Major Oil Marketers Association of Nigeria. Marketers argue that the price of petrol from the Dangote refinery should be close to this figure.
The Nigerian National Petroleum Company Limited (NNPC) is the sole importer of petrol into Nigeria, as other marketers have halted imports due to difficulties in accessing U.S. dollars for purchases. NNPC’s Chief Financial Officer, Umar Ajiya, recently acknowledged that the company is bearing a substantial subsidy burden on petrol imports, selling the product at about half of its landing cost under an agreement with the government.
Ajiya explained that while the official pump price is around N600 per litre, the average landing cost is closer to N1,200 per litre. NNPC has been covering the shortfall, amounting to about N7.8 trillion in the first seven months of 2024, through a reconciliation process with the government.
The Federal Government’s committee has already reached an agreement with the Dangote Petroleum Refinery to begin the rollout of petrol in September 2024, with crude oil sales to the refinery starting on October 1, 2024. However, discussions on the cost of petrol from the Dangote refinery are still ongoing.
Sources within the government and oil industry have suggested that the only viable options are for the government to subsidize the petrol produced by Dangote or for Nigerians to pay the full market price. They also noted that the framework for crude oil sales in naira is nearly complete, with the committee meeting multiple times each week to finalize the details.
Meanwhile, oil marketers have indicated that they are willing to buy petrol from the Dangote refinery, but only if the price is manageable. They have also pointed out that any potential subsidy on Dangote’s petrol would require government intervention, as the refinery cannot absorb the subsidy costs on its own.
The Independent Petroleum Marketers Association of Nigeria has also expressed concerns, stating that without government intervention, it will be difficult for marketers to purchase petrol at the prevailing retail prices.
The Federal Government is exploring alternatives, such as the Compressed Natural Gas (CNG) initiative, to reduce the cost of subsidies on PMS. However, with the government currently operating without a subsidy in the budget, there is uncertainty about how the pricing of petrol from the Dangote refinery will be managed.
As discussions continue, it remains to be seen whether the government will intervene in the pricing of petrol or allow market forces to dictate the cost. The outcome of these deliberations will have significant implications for both the Nigerian economy and consumers.
