Fuel importers may face a significant financial setback, losing an average of N2.5bn daily and N75bn monthly, following the recent price cut for Premium Motor Spirit (PMS) by Dangote Petroleum Refinery.
Investigations by The Punch show that the current landing cost of petrol, as reported by industry players, exceeds the new ex-depot price set by Dangote Refinery by over N100.
On February 27, Dangote Refinery reduced its ex-depot (gantry) price of petrol by N65, from N890 to N825 per litre. This marks the second price reduction this year and the third in two months. The refinery’s new pricing will be reflected in retail outlets nationwide, including those of MRS, Heyden, and Ardova.
For MRS Holdings stations, the price will be N860 per litre in Lagos, N870 in the South-West, N880 in the North, and N890 in the South-South and South-East. Prices at Ardova and Heyden stations will be N865 in Lagos, N875 in the South-West, N885 in the North, and N895 in the South-South and South-East.
The reduction puts marketers at a disadvantage, as they are forced to sell petrol at prices below their costs. According to the Major Energy Marketers Association of Nigeria, the landing cost of petrol last week was N927 per litre, which is N102 higher than the new ex-depot price of N825 set by Dangote Refinery.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) revealed that Nigeria’s daily consumption of PMS stands at around 50 million litres, with more than half of this amount being imported due to insufficient local refinery output. As a result, importers and depot owners are responsible for importing approximately 25 million litres of PMS daily.
Based on the current landing cost of N927 per litre, importing this volume would cost N23.18bn. In contrast, the Dangote refinery’s price of N825 would reduce the cost to N20.63bn, leaving a daily difference of N2.5bn.
Fuel importers have expressed concerns that they may be forced to sell at a loss, as consumers will gravitate toward cheaper options. Some dealers acknowledge that Dangote’s pricing strategy is making fuel imports increasingly unattractive.
According to one retailer, the price cuts will discourage many from importing fuel, forcing some to turn to local sources.
If dealers are forced to sell PMS at N825 per litre, they will collectively incur losses of N2.5bn daily, amounting to N76.5bn per month, or N918bn annually.
Chinedu Ukadike, the National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), confirmed that the price reduction would hurt importers and suggested that Dangote’s strategy of undercutting competitors may drive them out of business.
Despite the challenges, IPMAN’s National Vice President, Hammed Fashola, acknowledged that the price cuts were beneficial to consumers but acknowledged the financial strain on marketers and importers. He noted that the new prices bring relief, but they also come with significant losses for those with existing stock.
Economist Professor Adeola Adenikinju stressed that the market is competitive and that Dangote’s ability to meet domestic demand could render imports unnecessary.
He cautioned, however, about the potential for monopolistic practices and recommended that the government ensure fair competition in the industry.
To balance the market, Adenikinju advised the Nigerian National Petroleum Company (NNPC) to strengthen its position and remain a viable competitor to Dangote Refinery.
Punch
