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  • Oil & Gas - News
  • Updated: June 21, 2024

Experts predict petrol, diesel prices to remain high despite Dangote refinery's operation

Experts predict petrol, diesel prices to remain high despite

Petrol Subsidy Impacts in Benin Republic

Even with the start of operations at the Dangote Petroleum Refinery, experts suggest that petrol and diesel prices in Nigeria are unlikely to drop significantly.

Since the removal of the petrol subsidy in May 2023, the price of petrol has surged from approximately N184 per litre to over N600 per litre, varying by location.

Diesel prices have also spiked, currently retailing at about N1500 per litre.

According to Hector Igbikiowubo, Publisher of Sweet Crude Reports, and Ugodre Obi-Chukwu, Founder of Nairametrics, the Dangote refinery, despite being a major facility based in Lagos, faces significant cost challenges.

They explained on Channels Television's socio-political programme, "Inside Sources with Laolu Akande," that the operational costs are heavily influenced by the import-dependent nature of the refinery's inputs. Additionally, the volatility of foreign exchange rates further complicates the potential for reducing fuel prices.

Both Igbikiowubo and Obi-Chukwu praised Aliko Dangote, Africa’s richest man, for overcoming numerous obstacles to bring his vision of a functional refinery to fruition.

They emphasised that Dangote's success highlights the Federal Government's lack of excuses for the non-functionality of Nigeria's four state-owned refineries.

They also urged the Nigerian National Petroleum Company (NNPC) Limited to ensure an increased supply of crude oil to the Dangote refinery.

Dangote recently stated that his refinery will continue to import 24 million barrels of West Texas Intermediate crude due to insufficient local crude production and supply from the NNPC.

While acknowledging that the Dangote refinery alone cannot fully address Nigeria’s energy security challenges, the experts noted that its operation will significantly improve the availability of premium petrol products in the country.

“The Dangote Refinery cannot solve the problem because the Dangote Refinery will continue to pay for crude oil in USD (United States Dollar),” Igbikiowubo said.

“The question now is how come the NNPC isn’t allotting all of its 445,000 barrels per day to the Dangote Refinery for refining? Why is it convenient to export crude oil when you have a facility like the Dangote Refinery up and running? You make more money if you export refined petroleum products than if you export crude oil.”

Obi-Chukwu agreed with Igbikiowubo that the dominance of the greenback in the operational cost of the Dangote Refinery might not necessarily lower the cost of the refined products for end users.

Obi-Chukwu said, “As much as the refinery is local, most of the input cost for that refinery is still going to be imported. Whether it is the personnel that will service the refinery. Whether it is the spare parts that will be changed and serviced. Even the crude itself is also being imported.

“A lot of the breakdown of the cost still has foreign components in there. So, it is quite unlikely that you might see a substantial amount of savings to the end consumers. Nevertheless, even if we get 10% savings, it is still better than what we currently have.”

The refinery sited in Lagos and owned by the billionaire businessman commenced operations last December with 350,000 barrels a day. The refinery hopes to achieve its full capacity of 650,000 barrels per day by the end of the year.

The refinery has begun the supply of diesel and aviation fuel to marketers in the country while petrol supply is expected to commence mid-July.

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