In a recent development offering a glimmer of hope amidst Nigeria’s ongoing fuel scarcity crisis, the Dangote Refinery is poised to begin supplying Premium Motor Spirit (PMS), commonly known as petrol, to the Nigerian market. This new supply could potentially ease the persistent fuel shortages that have plagued the nation.
The refinery’s readiness to distribute petrol comes at a time of considerable tension and confusion. Business and commercial activities have been severely impacted by the prolonged scarcity of fuel. Adding to the turmoil, the Nigerian National Petroleum Company Limited (NNPCL) has raised petrol prices from N617 per litre to N897 per litre, effective September 3, 2024. This abrupt price hike has exacerbated the public’s frustration and highlighted the government’s struggles to adequately supply fuel despite implementing a new pricing template.
NNPCL’s Vice President of Downstream, Adedapo Segun, addressed the price increase on ARISE NEWS Channel’s The Morning Show, stating that the new prices do not reflect free market conditions and are not indicative of market realities.
In a positive turn, the Dangote Refinery, valued at $19 billion and led by Alhaji Aliko Dangote, has announced its readiness to alleviate the fuel supply crisis. Dangote assured that the petrol from his refinery would meet high global quality standards and address the recurring issue of fuel queues in Nigeria. He emphasized that the refinery would provide a consistent supply of premium-quality petrol and reduce the nation’s dependence on fuel imports, which could also lessen the pressure on Nigeria’s foreign exchange reserves.
Dangote highlighted that the refinery’s operations would allow for accurate tracking of national fuel consumption and ensure reliable supply, potentially leading to a significant reduction in fuel shortages. He also warned that any attempt to sabotage the refinery’s operations would result in the export of their products to other countries.
Despite these assurances, the Dangote Group clarified that it has not yet set or influenced the petrol prices. The group, through its Chief Branding and Communications Officer, Anthony Chiejina, has refuted media reports claiming that the NNPCL has begun purchasing petrol from the refinery at the new price. Chiejina stressed that the price-setting process is under the purview of regulatory agencies and that a formal contract with NNPCL is still pending.
Industry reactions to the new fuel prices have been mixed. Femi Otedola, Chairman of Geregu Power, lauded the commencement of Dangote Refinery operations as a milestone for Nigeria, suggesting it could diminish the influence of local import-dependent fuel depots. He criticized entrenched interests benefiting from Nigeria’s reliance on imported fuel, predicting a shift in the market dynamics.
Conversely, the new petrol price hike has alarmed manufacturers and businesses. Segun Ajayi-Kadir, Director-General of the Manufacturers Association of Nigeria (MAN), warned that the price increase would likely reduce consumer purchasing power and adversely impact small and medium-sized enterprises. Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry (LCCI), expressed concerns that the price surge could lead to higher overall inflation and strain businesses across various sectors.
Analysts are questioning the delay by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) in determining the cost of Dangote petrol for the market. Some suggest that the regulatory silence might shift public frustration toward the refinery.
Further commentary from experts includes Professor Uchenna Uwaleke, who highlighted the need for government palliatives to mitigate the impact of the price hike on inflation and economic stability. Additionally, Gideon Ikhine, a fellow of the Nigerian Society of Engineers, and Timothy Okon of Teno Energy, have expressed concerns about the implications of having a single refinery dominating the market and the potential costs involved. Johnson Chukwu of Cowry Assets Management suggested that the price increase was inevitable, given the financial demands of paying for Dangote’s petrol supplies.
As Nigeria navigates these challenges, the full impact of Dangote Refinery’s entry into the market remains to be seen, with stakeholders watching closely to gauge its effects on fuel supply, prices, and the broader economy.
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