The NNPC, which is the sole importer of petrol into Nigeria, has consistently denied subsidising the cost of PMS but refused to disclose the landing cost of the product.
However, it admitted on Sunday that it is facing a financial strain due to the supply costs of the PMS.
Landing cost of petrol, which includes the product’s international price, shipping, insurance and other charges, has increased to N1,203/litre from N720/litre in October 2023. Should the NNPC cease to pay petrol subsidies, which is likely to happen, the PMS price will settle between N1, 300 and N1,350 per litre, marketers told BusinessDay.
An independent oil marketer, who preferred anonymity, said: “It was almost inevitable for the pump price to remain the same, as this is one of the outcomes of a fully deregulated market.
“The NNPCL remains the main importer, with private importation remaining limited. This situation is worsened by Nigeria’s declining crude oil output, which impacts the country’s capacity to import refined products,” the marketer said.
Tunji Oyebanji, the chief executive officer of 11 Plc (formerly Mobil Nigeria), said selling below the landing cost, whether from import or local refineries, is not sustainable.
“If they sell at an economic price, perhaps others can import, supply will improve, and the financial strain will not be on them alone. It’s either that or these supply disruptions will continue indefinitely. I am baffled that they have not been upfront about this since instead of denials,” Oyebanji said in a note.
Further findings showed the landing cost of N1,203 does not include Nigerian Ports Authority charges, vessel charges, the Nigerian Maritime Administration and Safety Agency charges, and other distribution costs.
Some of these are charged in dollars, and some experts are calling for a review to reduce petrol costs.
Gillis Harry, national president, the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), told BusinessDay that with the current landing cost of refined products, Nigerians may not see any imminent reduction in the price of petrol.
According to him, the recent developments on the debt profile of the NNPC signal the need for a quick move towards ensuring that the domestic refineries come on board and are made to function optimally.
“As we speak, there is nowhere in the world PMS that can be landed at less than $1. You know what that will be in naira due to the exchange rate. And with this, there is no way we can sustain selling this product below N1,200,” he said.
Abubakar Maigandi, president of the Independent Petroleum Marketers Association of Nigeria (IPMAN), said that the troubles being faced by the NNPC are not supposed to affect fuel supplies in the country if only other marketers were granted the rights to import refined products.
He explained that the association has continued engagement with the government to see how the scarcity can be addressed by allowing members to import petrol into the country.
“What we are telling Nigerians is that there is no need for panic. As marketers, we have petrol for sale but not the quantity that we should have. Our stock is a bit down, but some marketers are still selling,” Maigandi said.
On Monday, Dangote refinery announced it has started the petrol, as the NNPC is set to become the initial exclusive buyer of its products.
According to two people who are aware of the matter, Dangote facility is on the verge of producing large amounts of petrol expected to hit the market this week.
The sources told Bloomberg that the key to the plant’s petrol output is a unit called the reformer, which produces blend stock for the road fuel.
“This reformer started operating, with gasoline production expected to begin by the end of the week,” one of the persons said. Another source said petrol would be rolled out this week.
Dangote’s production will impact billions of dollars of trade in fuel markets regionally and beyond. Nigeria received almost 250,000 barrels a day in shipments last year, mostly from Europe, according to data from analytics firm Vortexa Ltd.
“We are testing the product (petrol) and subsequently it will start flowing into the product tanks,” Devakumar Edwin, vice president at Dangote Industries Limited, told Reuters.
He did not say exactly when the gasoline would hit the local market.
Edwin said the NNPC Ltd, Nigeria’s sole importer of gasoline, would buy its gasoline exclusively.
“If no one is buying it, we will export it as we have been exporting our aviation jet fuel and diesel,” Edwin said.
The recent announcement that the national oil company will become the exclusive buyer of petrol from the Dangote refinery could provide the much-needed relief to the NNPC, which is currently grappling with its international obligations to oil traders.
If the Dangote refinery exclusively supplies to the NNPC, it would significantly lower importation and logistics costs, allowing local marketers to purchase petrol from NNPC at market-driven prices.
This arrangement could also address the persistent fuel scarcity that has plagued the country for over a month, with little progress made by the national oil company.
“The news that Dangote is processing gasoline couldn’t come at a more crucial time, given the NNPC’s statement about its difficulties securing imported supply due to financial strain,” said Clementine Wallop, director, sub-Saharan Africa at political risk consultancy Horizon Engage, told Reuters.
She said this “prompts the question of how NNPC will manage purchasing from Dangote, and impresses the need for greater transparency in its finances.”
BusinessDay findings showed most filling stations in Abuja and Lagos remain shut, forcing commercial motorists and private car owners to form long lines at the few outlets that are still operating.
In Ikeja, Maryland, Ikorodu, and other parts of Lagos, petrol prices have soared to as high as N1,000 per litre, intensifying the struggle for fuel.
This troubling trend is also observed in Ogun State and even in the nation’s capital, Abuja.
