Experts Approval For Diesel Price Reduction, Attributed To Deregulation And Naira Flotation

Stakeholders in Nigeria’s oil and gas industry have praised President Bola Tinubu’s economic policies, attributing the recent reduction in diesel prices to the gains from these policies. They highlighted measures such as the removal of fuel subsidies and the unification of foreign exchange rates, which have begun to yield positive results in the oil sector and the broader economy.

Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, echoed this sentiment during an interview, stating that the Nigerian economy is moving in the right direction due to President Tinubu’s strategic reforms. He emphasized progress in stabilizing the exchange rate and reducing food inflation, attributing these achievements to the president’s economic team.

“The Economic Team of President Bola Ahmed Tinubu is here to showcase the progress made so far through his bold, courageous and strategic reforms of the Nigerian economy in order to get it stabilized and attract investment to keep it growing again. We’ve all seen what has happened in terms of stabilizing the exchange rate and inflation which is headed in the right direction.”

The recent reduction in the pump price of diesel by the Dangote Refinery was seen as a reflection of these positive economic trends. While some attributed the price reduction solely to market realities influenced by the federal government’s economic policies, others cautioned against oversimplification. They noted that the refinery’s decision to lower diesel prices was also influenced by shifts in the exchange rate, which made it necessary to adjust prices to remain competitive.

“The Dangote Refinery has contributed hugely to Nigeria’s downstream sector since coming on board no doubt but ascribing the sole credit for recent pump price reduction in diesel is share ignorance. People need to understand that the Dangote Refinery is a business outfit that has loans to service and repay. It only reduced, ( not crashed) the price of diesel because the exchange rate dropped.

In just a matter of days, exchange rate went from N1300 to N1000 against the Dollar and that’s more than a 20% adjustment. The normal thing is for commodities (including diesel) to reflect that shift/Naira appreciation because if Dangote Refinery don’t shift their price to remain competitive, marketers will buy from other foreign traders. If the naira weakens again today, Dangote diesel and petrol prices will go up automatically.”

Furthermore, criticisms were raised against a report by S&P Global, which suggested that relaxed quality controls at the Dangote Refinery led to reduced domestic prices. These criticisms argued that such reports were attempts by European refiners to undermine Dangote Refinery’s emergence as a significant competitor in the market.

“Economist, Lanre Jimoh, dismissed the report as the antics of European refiners who now see Dangote Refinery as a potent competitor whose arrival into the market marks the beginning of a serious threat to their total market domination. ‘The principal factor that led to the reduction in diesel price is a result of favourable home economic policies which is favourable to the business. Nothing to do with low quality or low standard of diesel production by Dangote Refinery.”

Economists and industry stakeholders emphasized that the reduction in diesel prices was primarily a result of favorable economic policies implemented by the government. They highlighted the positive impact of these policies on the downstream sector of the oil industry and expressed optimism about the future trajectory of the industry if the government maintains its current momentum.