September 10, 2024
By Okafor Joseph Afam

The cost of landing petrol in Nigeria has continued its upward trajectory, raising concerns among independent oil marketers who now fear the potential impact of high petrol prices once the Dangote Refinery commences full operations. This has sparked anxieties about further pressure on consumers, who are already grappling with rising fuel prices across the country.

Soaring Landing Costs

The landing cost of petrol, which refers to the total expenses incurred in bringing fuel from abroad into Nigeria, including freight, insurance, and port charges, has been on the rise due to several factors. Chief among these is the ongoing fluctuation in the global oil market, driven by geopolitical tensions, production cuts by OPEC+ nations, and the depreciating value of the naira against the dollar.

With global crude oil prices climbing to over $90 per barrel and the naira continuing to weaken, the cost of importing refined petroleum products has become a heavy financial burden for Nigerian marketers. As a result, marketers have reported landing costs exceeding ₦650 per litre in recent weeks, a sharp increase compared to previous months.

Dangote Refinery’s Influence

While the Dangote Refinery, Africa’s largest privately-owned refinery, is expected to significantly reduce Nigeria’s dependence on imported fuel, there are growing concerns that the refinery’s petrol price may be higher than anticipated. This fear stems from speculation that the refinery will set its prices based on international market standards, as opposed to offering locally refined fuel at subsidized rates.

A senior marketer, speaking under the condition of anonymity, expressed worry that Dangote’s petrol might be sold at a higher price due to the need to cover production costs, taxes, and other operational expenses. “We’re not expecting a drastic drop in fuel prices even with Dangote’s production because the refinery will likely factor in global market dynamics. If the landing cost remains high, coupled with Dangote’s prices, it could push retail prices to unbearable levels for the average Nigerian,” he stated.

Impact on Consumers

If the landing cost of imported fuel continues to rise while Dangote’s petrol is priced at a premium, Nigerian consumers are likely to feel the pinch. With the removal of fuel subsidies earlier in 2024, fuel prices have already spiked, leading to a surge in transport fares, food prices, and the cost of goods and services. Any further increase could exacerbate inflationary pressures and strain the purchasing power of the masses.

Many analysts have pointed out that the success of the Dangote Refinery in reducing fuel prices will largely depend on government policies, market regulation, and foreign exchange rates. Some industry stakeholders are calling for the Nigerian government to introduce measures to stabilize the naira and ensure that locally refined petrol is sold at competitive prices to avoid worsening the economic situation.

Conclusion

As the Nigerian fuel market braces for the Dangote Refinery’s full entry into the sector, marketers and consumers alike are watching closely to see how prices will be impacted. For now, the rising landing costs of imported fuel remain a critical issue, raising doubts about whether locally refined petrol will bring the relief that Nigerians desperately need.

The coming months will be crucial as both market forces and regulatory interventions shape the future of fuel prices in the country.