Importers of Premium Motor Spirit (petrol) may lose an average of N2.5bn daily and N75bn monthly following the latest PMS price reduction announced by the Dangote Petroleum Refinery.
Findings by The Punch revealed that the average landing cost of petrol as released by industry players is over N100 higher than the new ex-depot price of petrol at the Dangote refinery.
The Dangote refinery announced a reduction in the ex-depot (gantry) price of petrol by N65, from N890 to N825 per litre, effective from Wednesday, February 27. This was the second price reduction in the new year, and the third one in a space of two months.
It disclosed that Nigerians will now buy at new prices from its partners nationwide, including MRS, Heyden, and Ardova.
“Nigerians will be able to purchase the high-quality Dangote petrol at the following prices in all our partners’ retail outlets. For MRS Holdings stations, it will sell for N860 per litre in Lagos, N870 per litre in the South-West, N880 per litre in the North, and N890 per litre in the South-South and South-East, respectively.
“The same product will also be available at the following prices in Ardova Petroleum and Heyden stations: N865 per litre in Lagos, N875 per litre in the South-West, N885 per litre in the North, and N895 per litre in the South-South and South-East,” the company said.
The PUNCH reports that the new Dangote price came to marketers at a huge cost as they may be forced to sell petrol far below their costs.
According to the Major Energies Marketers Association of Nigeria, the landing cost of petrol as of last week was N927 per litre. This is N102 above the N825 ex-depot price of PMS at the Dangote refinery.
Recently, the Nigerian Midstream and Downstream Petroleum Regulatory Authority said Nigeria’s daily PMS consumption was around 50 million litres per day.
The NMDPRA said more than half of the 50 million litres are being sourced from foreign countries because local refineries cannot supply up to 50 per cent of it.
“Following Mr President’s withdrawal of subsidy, the announcement of May 29, 2023, we immediately saw a steep decline in consumption. And between then and as we speak, we have continued to do plus or minus 50 million litres a day. Of these 50 million litres averaging for each day, less than 50 per cent of that is contributed by domestic refineries. And so the shortfall by the PIA is sourced by way of imports.
“For clarity, what I am saying is that the contribution of local refineries towards sufficiency is less than 50 per cent,” the Chief Executive of the NMDPRA, Farouq Ahmed, declared.
From the regulator’s claims, it could be deduced that importers and depot owners import about 25 million litres of PMS per day.
Assuming the 25 million litres of PMS arrive in Nigeria at N927 per litre, this will amount to approximately N23.18bn.
With this new price, the Dangote refinery would have sold the same quantity of PMS at N20.63bn, leaving a difference of N2.5bn daily.
Fuel importers, who spoke with our correspondent after Dangote announced the price cut, said dealers might be compelled to sell below their cost prices as consumers would only buy from where petrol is cheaper.
According to some of them, the Dangote refinery is gradually making importation less attractive with how it has dropped the prices of petrol and diesel lately.
The importers said they have been managing to sell the imported products with little or no margin due to the need to compete with others in the market.
“Some of us who have imported PMS are feeling the heat of Dangote’s decision to slash prices. Though it is a good thing to reduce petrol price, it is taking a toll on our business. That’s the simple truth,” a dealer who spoke to our correspondent in confidence due to the nature of the matter, stated.
Another retailer noted that the Dangote refinery is reducing prices to discourage fuel importation, saying many will have to stop bringing in petroleum products from other countries.
“Dangote understands the competition in the business and this latest reduction will further discourage fuel imports. There will be losses as we may have to drop our prices too. At the end of the day, some of us will source our products locally. I will just advise Dangote to create a level playing field for all,” the retailer stated.
In a situation where the dealers are compelled by the current reality to sell PMS at N825 to marketers and retail outlet owners, they will lose an average of N2.5bn per day. This will amount to N76.5bn in a month and N918bn if this continues in a year.
The National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike, confirmed that importers may incur losses as a result of the new price reduction.
Ukadike maintained that the price reduction would affect importers, stressing that Dangote was maximising the advantages of deregulation.
“Dangote may ‘kill’ fuel importers by this continued lowering of prices. All those importers who have challenged Dangote that they want to import cheaper fuel, as they’re just nearing the sea shore, Dangote will reduce the price and they will run into trouble,” Ukadike stated in his personal opinion.
Marketers lament
The National Vice President of IPMAN, Hammed Fashola, said that although the marketers are happy with the new prices, the cut affects their business.
According to him, both importers and filling stations with old stocks will count losses following the price reduction.
“As independent marketers, we are happy that the Dangote refinery has brought down the price again. It is good for us. It is good for the business. It reduces financial burden. At least we have enough room to play now. But it comes with a cost. The sudden price changes come with a cost.
“Some of us just bought products, either from MRS or other sources, and all of a sudden, the price was reduced. It comes with a cost. It is going to be a big loss to everybody. It depends on your volume. If you are an importer, your loss will be bigger. If you are a marketer and you have more tension, your loss will be more.
“It depends on the stocks you are having. Everybody is feeling the heat. But the beauty of it is that the masses are happy. Everybody is happy. We should not be greedy. We have to bear it. That is the beauty of deregulation, where you have more players like importers, local refiners, and others. Now we can see the difference,” he added.
Fashola recalled that he once wondered about why an imported product could be cheaper than the one that is locally refined.
“I think things are getting clearer now. Personally, I am happy with what is happening now. We will get it right as we move. I am sure it will get to a stage where the price will be stabilised, when we can run a certain template for two to three months. When we get to that level, business will be good for everybody,” the IPMAN leader submitted.
A Professor of Economics at the University of Ibadan, Adeola Adenikinju, said the importers will have to bear their losses, saying this is a competitive market.
According to him, Dangote and other refineries in the country should be able to satisfy local needs without recourse to importation.