Tinubu Panel, Dangote Refinery Discuss September PMS Rollout and Pricing.
The Federal Government’s committee, tasked with implementing the sale of crude oil to local refineries in naira, is set to finalize discussions on the pricing of Premium Motor Spirit (PMS), commonly known as petrol, to be released by the Dangote Petroleum Refinery in September.
Officials from both the oil marketing sector and the Implementation Committee on crude oil sales in naira, led by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, have confirmed that several meetings are scheduled in the coming weeks to address this development. The committee aims to establish a framework that will set a benchmark price for the crude oil the Dangote refinery will purchase in naira.
One critical decision the Federal Government must make is whether to subsidize the petrol produced by the Dangote refinery or allow it to be sold at market prices, which are expected to be high.
Oil marketers have already warned that the cost of petrol from the Dangote refinery could surpass current pump prices, which range between N600 and N700 per litre across the country. Recent data from the Major Energies Marketers Association of Nigeria indicate that the landing cost of PMS is around N1,117 per litre, suggesting that the actual market price for Dangote petrol may be close to this figure.
Currently, the Nigerian National Petroleum Company Limited (NNPCL) is the sole importer of petrol in the country, as other marketers have halted imports due to challenges in accessing the US dollars needed for such transactions. NNPCL’s Chief Financial Officer, Umar Ajiya, recently disclosed that the company has been managing a heavy subsidy burden on petrol imports, selling the product at about half its landing cost under a government agreement.
In the first seven months of this year alone, NNPCL covered about N7.8 trillion in what it described as a “shortfall” between the landing price and the retail price of petrol. Ajiya clarified that while NNPCL has not paid subsidies directly to marketers for the past eight to nine years, the company has been absorbing the difference between the landing cost and the government-mandated retail price.
As the Dangote refinery prepares to roll out its first PMS delivery in September, the Federal Government faces a critical decision: to either reintroduce subsidies or allow the product to be sold at market prices, which would likely increase the cost for consumers.
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Officials from the Federal Ministry of Petroleum Resources and other relevant bodies are also considering the implications of these decisions on the economy, particularly given the current economic challenges facing Nigerians. The lack of US dollars remains a significant obstacle, with the committee working to benchmark the exchange rate for crude sales to Dangote.
The government has also introduced the Compressed Natural Gas (CNG) initiative as a potential solution to reduce reliance on petrol and alleviate the subsidy burden. However, the uptake of CNG has been slow, and the government is under pressure to find a sustainable solution to the PMS pricing dilemma.
Discussions between the government and the Dangote refinery management are ongoing, with key stakeholders including the Nigerian Midstream and Downstream Petroleum Regulatory Authority, the Central Bank of Nigeria, and the African Export-Import Bank playing crucial roles in the process. The outcome of these talks will determine whether Nigerians will face higher petrol prices or if the government will intervene to maintain affordability.
