September 4, 2024/CSL Research
Based on news reports, the Nigerian National Petroleum Company (NNPC) Limited has commenced the transportation of Premium Motor Spirit (PMS) from the Dangote Refinery in Lekki, Lagos. According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the Dangote Refinery is set to deliver 25 million liters of petrol daily to the Nigerian market starting in September 2024.
This volume is expected to increase to 30 million liters per day by October 2024. With a total investment of US$20 billion, the refinery’s operations provide a new, potentially more efficient supply route for Nigeria’s petrol needs. Additionally, the refinery’s capacity is sufficient to meet the petrol demand not only in Nigeria but across the entire sub-Saharan region of Africa.
In a related development, Nigerians experienced a sharp increase in pump prices yesterday, with the NNPC reportedly increasing its petrol price from N855 per litre to N897 per litre at various outlets in Lagos. Oil marketers are now closely watching the price of Premium Motor Spirit (PMS) produced by the Dangote Refinery, following the refinery’s announcement that only the Nigerian National Petroleum Company Limited will lift the product for now. Marketers have earlier expressed concerns that the price of Dangote’s PMS might be higher than anticipated.
This concern arises from the refinery’s current dependence on imported crude oil, as it has been unable to secure adequate local feedstock from international oil companies (IOCs). The Dangote Refinery, which has a capacity of 650,000 barrels per day, has been importing crude oil from the United States and other countries at a higher cost. Marketers fear that these high import costs will drive up production expenses, leading to an increase in the ex-depot price of the refinery’s PMS.
The Dangote Petroleum Refinery has the capacity to fully meet Nigeria’s demand for refined products, including gasoline, diesel, kerosene, and aviation jet fuel, with additional surplus available for export. There are high expectations that the refinery will positively impact the economy by eliminating recurring fuel shortages, reducing the price of PMS, and potentially easing foreign exchange shortages. As the refinery begins operations, it is expected to provide much-needed relief to Nigerians currently facing severe petrol scarcity in towns and cities across the country. The refinery’s output will also offer a clearer picture of Nigeria’s actual fuel consumption.
Overall, Nigerians are optimistic that the refinery’s operations will bring significant economic benefits. Although the current administration successfully eliminated fuel subsidies, they have since been reintroduced. Any attempt to adjust fuel prices to reflect current realities is likely to face strong resistance from the public.
