The Federal Government’s committee, tasked with implementing crude oil sales to local refineries in naira, is set to deliberate on the pricing of Premium Motor Spirit (PMS), also known as petrol, which will be produced by the Dangote Petroleum Refinery starting next month. The committee, led by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, is expected to hold several meetings in the coming weeks to finalize the pricing framework.
Sources within the oil industry revealed that the cost of petrol from the Dangote refinery could be higher than current pump prices, which range between N600 and N700 per litre across Nigeria. The actual landing cost of PMS has been reported at around N1,117 per litre, far above the prices consumers are currently paying.
The Nigerian National Petroleum Company Limited (NNPC) has been the sole importer of petrol in Nigeria, covering the shortfall between the landing cost and the retail price through a subsidy arrangement with the government. However, the burden of these subsidies, estimated at N7.8 trillion in the first seven months of 2024, has raised concerns about the sustainability of this approach.
As the Dangote refinery prepares to release its first batch of petrol, the government faces a critical decision: either subsidize the product or allow it to be sold at market prices, which could be significantly higher than what Nigerians currently pay. This dilemma has sparked discussions among government officials, oil marketers, and industry stakeholders.
The Federal Government has already reached an agreement with the Dangote refinery for the sale of crude oil in naira, starting October 1, 2024. However, the pricing of the petrol produced by the refinery remains a contentious issue, with the possibility of government intervention through subsidies still on the table.
Oil marketers have expressed concerns about the viability of purchasing petrol from the Dangote refinery at market prices, given the existing cap on retail prices in Nigeria. The Independent Petroleum Marketers Association of Nigeria (IPMAN) noted that without government intervention, it would be difficult for marketers to buy and sell Dangote petrol at competitive prices.
The committee’s ongoing discussions will determine the final pricing framework, with significant implications for Nigeria’s fuel market and broader economy.
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