PETROAN Pushes for Domestic Pricing at Dangote Refinery Amid Cost Disparities

The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has expressed strong opposition to the Dangote Refinery’s decision to sell refined petroleum products at international market rates. According to PETROAN’s National PRO, Dr. Joseph Obele, this approach neglects Nigeria’s economic realities, where the cost of refining a liter of petrol is estimated to be under N600 due to government-backed crude oil concessions.

Key Issues Highlighted by PETROAN

1. Lower Domestic Production Costs:
   • PETROAN claims that Dangote’s production costs are significantly below international rates due to Nigeria’s decision to sell crude oil to the refinery in Naira rather than foreign currency. As a result, the production cost per liter is estimated to be N600 or less, and not exceeding N700 when international crude is used. Obele argues that this should translate to lower retail prices for Nigerian consumers, reflecting local cost advantages.
2. Domestic Pricing to Address Economic Hardship:
   • Dr. Obele emphasized the challenging economic conditions in Nigeria, including high inflation and low minimum wages. He stated that setting prices based on international market rates places an unnecessary burden on citizens, whose incomes are stretched thin. According to him, Dangote should instead base pricing on production costs plus a modest margin, making fuel more affordable in the local market.
3. Government Concessions and Dangote’s Obligations:
   • PETROAN points out that Dangote Refinery benefited from significant government concessions, including favorable foreign exchange rates and other incentives during its construction. This support, Obele argues, should be reflected in Dangote’s pricing structure by offering domestically refined fuel at a lower price.

NNPCL’s Shift to Domestic Refineries

The Nigerian National Petroleum Company Limited (NNPCL) recently announced a major shift from importing refined petroleum products to sourcing exclusively from domestic refineries, including Dangote’s. NNPCL’s CEO Mele Kyari made the announcement during a petroleum exploration conference in Lagos, asserting that the transition is a strategic decision for Nigeria’s energy independence.

Kyari emphasized that domestic sourcing is in NNPC’s best interests, aligning with its vision to strengthen the local refining industry. He highlighted that NNPC’s strategy ensures a stable market for Nigeria’s crude, especially as oil production expands globally and exporters seek new buyers.

The Pricing Debate’s Broader Implications

The debate underscores a significant tension between profitability and affordability in Nigeria’s energy market. PETROAN’s push for domestic-focused pricing at Dangote Refinery reflects a call for aligning petroleum prices with local economic conditions. If Dangote adjusts its pricing model to account for production costs and domestic concessions, it could provide much-needed relief for Nigerian consumers, potentially stabilizing the cost of essential goods and services linked to fuel prices.