The pump price of petrol has risen further across Nigeria, with prices nearing N1,400 per litre in some locations following another increase by the Dangote Petroleum Refinery.
The refinery raised its gantry price of petrol by N65 per litre on August 29, taking it from N1,200 to N1,265 per litre. The latest adjustment represents the third increase by the refinery within eight days.
Following the development, motorists in Lagos and Ogun states are paying about N1,310 per litre, while prices in parts of northern Nigeria and other areas farther from the refinery have risen to N1,350 or more.
In some locations, petrol is now approaching N1,400 per litre, as transportation and distribution costs add to the refinery’s ex-depot price.
The latest increases have attracted attention because they came amid a decline in international crude oil prices, despite continuing geopolitical tensions involving the United States and Iran.
However, the Dangote refinery has defended its pricing decisions, explaining that the prevailing international crude benchmark does not necessarily reflect the cost of crude currently being processed at the facility.
A senior executive of the refinery, who spoke to The PUNCH anonymously because he was not authorised to speak publicly, said there was a substantial time gap between the purchase of crude and its eventual arrival at the refinery.
According to him, crude procurement involves several stages, including negotiating and concluding the transaction, securing a loading window, chartering a vessel, loading the crude, sailing to Nigeria and securing a berth before the cargo can be discharged into the refinery’s storage tanks.
The executive said these processes could take considerable time, meaning that the crude being processed at any particular period might have been bought when international prices were significantly different from the prevailing benchmark.
He said: “If you want to buy crude at today’s price, when do you think you will complete the actual transaction to purchase the crude? When will you get a laycan? When can you get a ship chartered and a charter party agreement signed?”
He further asked when the vessel would load the crude, sail to Nigeria and eventually discharge the cargo into the refinery’s tanks.
The executive also pointed to crude already held in the refinery’s inventory, saying large volumes may have been purchased at higher prices.
“And what will happen to the huge quantities of expensive crude that you bought long ago and stored in the tanks? These are the factors determining the change in prices, not an immediate crude price change,” he said.
The latest adjustment means that Dangote’s petrol gantry price has increased by N100 per litre within eight days.
The refinery initially raised its gantry price from N1,165 to N1,185 per litre on August 21. Five days later, it increased the price by another N15 to N1,200, effective August 26.
On August 29, the refinery announced the latest N65 increase, bringing the price to N1,265 per litre.
The three adjustments amount to an increase of about 8.6 per cent. The latest increase also raised the refinery’s coastal PMS price from N1,582,380 to N1,669,545 per metric tonne.
In a price communication to customers, the refinery instructed them to return their existing Authorisations to Collect for repricing and said new volume contracts would be issued before loading could resume.
Meanwhile, data from the Major Energies Marketers Association of Nigeria’s Energy Bulletin for August 27 showed that Dangote’s PMS gantry price stood at N1,200 per litre.
The bulletin put the estimated spot import-parity price of petrol into tanks at N1,222.32 per litre, while the NPSC-NOJ spot estimate was N1,221.32 per litre.
At that time, Dangote’s N1,200 price was therefore N22.32 below the estimated import-parity price.
However, following the refinery’s subsequent increase to N1,265 per litre, its new gantry price was N42.68 above the August 27 import-parity estimate.
It remains unclear whether the import-parity figure had changed by the time of the latest adjustment.
The international crude market has remained volatile amid geopolitical tensions involving Iran and the United States and uncertainty over crude shipments through the Strait of Hormuz.
Oilprice.com reported that Brent crude closed at $88 per barrel on Friday, while West Texas Intermediate (WTI) closed at $83, representing a five per cent decline.
The Dangote executive, however, maintained that daily fluctuations in crude prices could not be used as an immediate basis for determining the cost of petrol produced from crude already purchased by the refinery.
The refinery’s position is that cutting petrol prices immediately after a fall in crude prices could result in products made from expensive crude inventory being sold at prices based on cheaper replacement crude.
The issue is particularly relevant to the Dangote refinery because it does not depend exclusively on locally produced 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 unsettled petroleum marketers, who say the volatility is making business planning increasingly difficult.
The National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Ukadike, said marketers were facing several factors capable of driving petrol prices higher.
“We are facing the challenges of the volatility in the market. There are policies of the government, policies of the international market, and exchange rates. These are inherent dispositions to the increase in pump prices. We are not refiners to be able to determine the price of petroleum products,” he said.
Ukadike acknowledged that Dangote had previously adjusted its petrol prices downward in response to developments in the international market.
“But, I also believe that Dangote has been consistent in terms of reducing its price in line with the international market rate. With this situation now, we cannot, at this particular point in time, structure our business. It’s going to be too difficult for us to structure our business,” he said.
He warned that prolonged tensions between Iran and the United States could further aggravate price instability.
“The more the Iran and United States crisis continues to persist, the more we’ll be having these irregularities in price,” Ukadike added.
The IPMAN spokesman said the fluctuations were already being reflected in pump prices nationwide, noting that independent marketers had little control over the factors driving the changes.
“Bear in mind that the price of crude oil is determined by the international market. So, for all the independent marketers, we will continue to strive. Prices have been fluctuating, and we are still loading,” he said.
He added that petrol prices would remain volatile for as long as crude prices and other factors affecting the financial environment remained unstable.
The renewed increase comes amid growing concerns over the impact of rising energy costs on households and businesses.
It also comes as former Vice President and presidential candidate of the African Democratic Congress (ADC), Atiku Abubakar, said he would restore fuel subsidies if elected, as part of measures to ease economic hardship and reduce the cost of living.
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