Amid Fuel Scarcity, Dangote Oil Raises Rays of Hope

The readiness of Dangote Refinery to release its Premium Motor Spirit into the market is sparking fresh hope for an uninterrupted fuel supply in Nigeria as the nation looks to reduce its dependency on imported fuel and the attendant strains on the economy, reports Festus Akanbi

In a week marked by frustration, uncertainty, and confusion over the prolonged fuel scarcity when business and commercial activities almost came to a halt, what made the difference was the readiness of the Dangote Refinery to push out its Premium Motor Spirit (PMS), otherwise called petrol to the Nigerian market.

It was a paradox that the news of the arrival of Dangote fuel in the market came almost simultaneously with the news of a sudden increase in the price of petrol by the Nigerian National Petroleum Company Limited (NNPCL)  from N617/litre to N897/litre from Tuesday, September 3, 2024. Unfortunately, there seems to be serious confusion as Nigerians are torn between the shock associated with the latest price increase and the government’s inability to pump enough quantity of the product to filling stations despite the unveiling of a new pricing template which the NNPCL’s Vice President, Downstream, Adedapo Segun said is not market reflective and could be higher.

Speaking on ARISE NEWS Channel’s The Morning Show last week, Segun explained the problems the company is facing concerning petrol supply, saying despite the increase in petrol prices from N617 per litre to N897, it does not reflect free market conditions.

As Dangote Oil Enters Nigerian Market

Meanwhile, a ray of hope emerged as the much-awaited PMS from Dangote Refinery was declared ready to hit the Nigerian market, raising the hope of an end to the problem of fuel scarcity and removal of pressure from the foreign exchange market, among others. 

Announcing the readiness of his refinery to pump his product into the Nigerian market, the Chairman of Dangote Group, and owner of the $19 billion Dangote Refinery, Alhaji Aliko Dangote, said the petrol from the plant, in terms of quality, could compete with products from other refineries across the world. He also assured that the products from its refinery would eliminate fuel queues all over the country, saying that the quality of the PMS would rank among the best in the world. He assures consistency in the supply of the product from the refinery to end the tension usually associated with fuel supply in the country.

“In the last 28 years, we haven’t had this kind of achievement. We have seen videos from 1974 where we had fuel queues and to date those queues persist, petrol refining at the Dangote refinery will guarantee a consistent supply of the highest quality,” Dangote stated.

He also said: “Now that we have this refinery working, it will show Nigeria’s true consumption. We can track each loaded truck and try to track the loaded ships as much as possible. “We can tell you where they are and for some of our products, we can tell you the (national) consumption.”

Dangote was confident his refinery would eliminate all fuel queues in Nigeria, and show the true consumption of Nigeria using our tracker. He believes the introduction of naira for crude would reduce the demand for FX by 40% apart from assuring Nigerians of quality petrol from the refinery, saying “Our quality matches that of America and any other country in the world.” 

Dangote Refinery also warned the NNPCL and other oil marketers, saying it would start exporting its petroleum products to other countries if they attempt to sabotage it. 

The company made this known on Monday through the Vice President of Oil and Gas at Dangote Industries Limited, Devakumar Edwin, while featuring on the live broadcast of Brekete Family Show.

Dangote Refinery Yet to Determine Pump Price

Meanwhile, the management of the Dangote Group has clarified media reports that the NNPCL has begun off taking petrol from its refinery at N897 per litre, stating that it cannot fix, or influence petrol prices in the country since it is the responsibility of the relevant regulatory agencies.

In a statement signed by its Chief Branding and Communications Officer, Anthony Chiejina, on Thursday, the group urged the public to disregard reports that the NNPCL has begun lifting and that it is yet to finalise a contract with the NNPCL on the pricing of petrol.

“Therefore, the issue of fixing the price of petrol lifted from our refinery does not arise, as we are yet to finalise our contract with NNPCL.” 

Endorsement

As the refinery completed its testing phase and is now ready to introduce its products to the local market, Dangote’s alter ego and chairman of Geregu Power, Mr. Femi Otedola said the successful operation of the Dangote Refinery could lead to a decline in the relevance of local depots, which have traditionally relied on fuel imports to meet domestic demand.

According to him, the successful commencement of operations at the Dangote Refinery marks a significant milestone, not just for the Dangote Group but for Nigeria as a whole. Otedola highlighted the refinery’s potential to reduce the nation’s dependence on fuel imports, a move that could reshape the country’s economic trajectory.

“You have dealt a death blow to the so-called local cabals who have fattened themselves for years, feeding off our nation’s economic slavery. These cabals, who have grown rich by keeping Nigeria in a perpetual state of dependence, must now face the reality that their era of easy gains is coming to an end,” Otedola said.

New Pump Price Jolts Manufacturers

As the new price increase spreads fears into Nigerian homes and businesses, the Director-general of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir said there is going to be a decline in purchasing power which will in turn reduce demand for non-essential goods and services. Experts said that small and medium-scale enterprises will be hard hit. 

In a similar vein, the director-general of the Lagos Chamber of Commerce and Industry (LCCI), Chinyere Almona said the increase in petrol prices would hurt businesses. According to her, “A steep price hike would likely trigger widespread price increases, potentially reversing the recent ease in inflation seen in July and leading to another surge in inflation rates. Balancing the need for fiscal responsibility with the economic impact on citizens is a complex task for the government. 

“The impact on businesses will be severe, with petrol prices affecting supply and logistics, power generation, transportation, and factory operations.“The cost of doing business will skyrocket, prices of goods will rise, and some firms may shut down due to low demand in the face of weakening consumer purchasing power. Of course, this will be followed by job losses,” Almona said.

Meanwhile, analysts are wondering why the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) is yet to determine the cost at which Dangote Refinery would sell its product to the Nigerian market. The argument is that keeping mum on the price level would transfer Nigerians’ anger to Dangote Refinery.

“What is the NMDPRA afraid of? What is the agency waiting for? Nigerians are supposed to have an idea of the cost of the Dangote fuel by now,” an analyst who spoke anonymously told THISDAY last week.

Analysts’ Views

Speaking on the unilateral declaration of the new pump price of petrol, an ARISE NEWS analyst, Frank Tietie argued the government or its agencies lacks the power to fix prices, saying this contradicts the Petroleum Industry law of the country. A professor of Capital Market in Nigeria, Prof Uchenna Uwaleke stressed the urgent need for the federal government to roll out palliatives to cushion the effort of the latest increase in fuel prices. He said the new development has set the tone for rising inflation although he believed that the future is bright for the country when we factor in the contribution of the Dangote refinery. He questions the decision to make the NNPCL a sole distributor given the company’s history of performance.

On his part, a fellow of the Nigerian Society of Engineers, Gideon Ikhine said  Dangote oil coming on a day when a new price increase was effected was not a good omen. He believed having a single functional refinery would come at a cost. He said the time has come for the federal government to ensure it goes back to the Port Harcourt Refinery where it has pumped about $45billion for refurbishing.

Managing Partner, of Teno Energy, Timothy Okon said it is early in the day to determine how much Dangote oil will cost in the market given other variables like logistics which must be factored in.

Managing Director of Cowry Assets Management Company, Johnson Chukwu said the increase in pump price was inevitable given the fact that the NNPCL needs to raise money to pay Dangote Refinery, which may not be able to sell in credit. “It’s either the federal government or NNPCL pays or they go back to the Nigerian people,” he said.