The Dangote Petroleum Refinery has explained its latest petrol price increase, saying the cost of crude oil purchased earlier and the lengthy process of transporting it to Nigeria are responsible for the recent adjustments.
The explanation came as the price of Premium Motor Spirit, popularly known as petrol, rose further across the country, with pump prices now ranging between N1,310 and N1,400 per litre, depending on location.
Petrol is currently selling for about N1,310 per litre in Lagos and Ogun states, while motorists in parts of northern Nigeria and other locations farther from the refinery are paying N1,350 or more.
The latest increase followed the refinery’s decision to raise its PMS gantry price by N65 per litre, from N1,200 to N1,265, effective August 29.
It was the third price adjustment announced by the refinery within eight days, bringing the total increase in its gantry price to N100 per litre during the period.
The refinery had first increased its gantry price from N1,165 to N1,185 per litre on August 21 before raising it again to N1,200 on August 26.
However, a senior executive of the refinery, who spoke with The PUNCH on condition of anonymity because he was not authorised to speak publicly, said the prevailing international crude price could not be used as the sole basis for determining the price of petrol produced from crude already purchased by the refinery.
The executive explained that there was a significant time lag between purchasing crude and its eventual arrival at the refinery for processing.
According to him, crude procurement involves negotiating and completing transactions, securing a loading window, chartering vessels, loading the crude, sailing to Nigeria and securing a berth before the shipment can be discharged into the refinery’s storage tanks.
He also pointed to the large volumes of crude purchased earlier at higher prices and still held in storage.
He said the factors involved in crude procurement meant that daily movements in international oil prices did not immediately translate into changes in the cost of crude being processed at the refinery.
The refinery’s explanation comes amid criticism over the repeated petrol price increases, particularly as international crude prices have recently declined.
The latest adjustment also moved the refinery’s coastal PMS price from N1,582,380 to N1,669,545 per metric tonne.
In its price communication, the refinery directed customers to return their existing Authorisations to Collect for repricing, adding that a new volume contract would be issued to enable immediate loading.
The impact of the latest increase is already being felt in the retail market, with petrol selling at about N1,310 per litre in Lagos and Ogun and N1,350 or more in parts of northern Nigeria.
In some locations, the product is approaching N1,400 per litre, with transportation and other distribution costs contributing to the price differences between the coastal areas and distant markets.
The Dangote refinery has said it plans to extend its free petrol distribution scheme across the country, a move that could help reduce some of the transportation costs associated with moving the product to distant locations.
Meanwhile, the latest price increase has renewed debate over the relationship between international crude prices, the cost of refined petroleum products and pricing decisions by domestic refiners.
Data from the Major Energies Marketers Association of Nigeria’s Energy Bulletin for August 27 showed that Dangote Refinery’s PMS gantry price was N1,200 per litre.
The estimated spot import-parity price of petrol into tanks stood at N1,222.32 per litre, while the NPSC-NOJ spot estimate was N1,221.32 per litre.
This meant that, as of August 27, Dangote’s N1,200 gantry price was N22.32 below the estimated spot import-parity price.
However, following the August 29 increase to N1,265, the refinery’s new gantry price was N42.68 above the August 27 spot import-parity estimate, although it was not immediately clear whether the import-parity figure had changed.
The crude market has also remained volatile amid geopolitical tensions involving Iran and the United States and uncertainty over crude flows through the Strait of Hormuz.
According to Oilprice.com, Brent crude closed at $88 per barrel while West Texas Intermediate closed at $83 on Friday, representing a five per cent decline.
However, the Dangote executive maintained that such daily price movements did not necessarily reflect the cost of crude already purchased by the refinery.
The issue is particularly significant for Dangote because the refinery does not rely entirely on Nigerian crude. Reuters reported on August 26 that between 30 and 40 per cent of the refinery’s crude feedstock was being imported.
The latest petrol price increases have also raised concerns among petroleum marketers, who say the volatility is making it difficult to plan their businesses.
The National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike, said marketers were contending with several factors capable of pushing up petrol prices, including government policies, international market conditions and exchange rate movements.
He acknowledged that Dangote had previously reduced its petrol price in response to movements in the international market but said the latest volatility was making business planning difficult for independent marketers.
Ukadike also warned that prolonged tensions between Iran and the United States could further worsen price instability.
He said petrol prices would remain volatile as long as crude prices and other factors affecting the petroleum market remained unstable.
The latest development comes as former Vice President Atiku Abubakar, the presidential candidate of the African Democratic Congress, has said he would reintroduce fuel subsidies if elected, citing the need to reduce hardship and the rising cost of living.