Dangote Refinery’s Fuel Supply Unlikely to Lower Prices, Say Experts

As the Dangote Refinery prepares to commence its Premium Motor Spirit (PMS) supply in mid-July 2024, industry insiders and energy experts have cast doubts on whether this will lead to a reduction in fuel prices in Nigeria.

The refinery, spearheaded by Africa’s richest man Aliko Dangote, has faced delays, pushing the start date from June to mid-July due to what Dangote termed “a little bit of delay.” Despite beginning the supply of diesel and aviation fuel in April, the refinery, which was commissioned in May last year, has struggled to secure crude oil for petrol production.

Dangote has accused powerful cartels within the oil and gas sector of sabotaging his efforts, citing their desire for his project to fail. Devakumar Edwin, Vice President of Dangote Industries Limited, recently accused International Oil Companies (IOCs) of selling crude oil to the refinery at a premium, forcing the company to look to the US for crude imports despite Nigeria’s own reserves.

In response to these allegations, the Lagos State Chamber of Commerce and Industry and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) cited oil theft and vandalization of pipelines as contributing factors to the crude supply issues. Despite assurances from NUPRC, the refinery continues to face supply challenges, making the mid-July commencement date uncertain.

Amid these challenges, the potential for a drop in fuel prices with domestic supply has been questioned. The removal of fuel subsidies last year saw petrol prices soar from N238 to an average of N769.62 per liter by May 2024, contributing to significant inflation and economic hardship.

Billy Gillis-Harry, President of the Petroleum Products Retail Outlets Owners Association (PETROAN), expressed skepticism that Dangote’s fuel supply would lower prices, citing the example of diesel and aviation fuel, which did not see price reductions despite similar hopes. He pointed out that importing crude oil to Nigeria and selling refined products in Naira would likely maintain high prices due to fluctuating foreign exchange rates.

Gillis-Harry emphasized the uncertainty of the refinery’s future projections and suggested that without subsidies, fuel prices might even rise. He noted the ongoing lack of confidence in the full-scale operations of other Nigerian refineries, such as those in Port Harcourt, Kaduna, and Warri, which have faced numerous delays.

Meanwhile, other stakeholders like Barr. Ameh Madaki and Professor Wumi Iledare have criticized the management and policy inconsistencies within Nigeria’s oil sector. They argue for a deregulated market and better governance to address the sector’s challenges effectively.