The recent increase in petrol prices by the Dangote Petroleum Refinery has raised significant concerns regarding the stability of the domestic fuel market in Nigeria. The refinery has adjusted its petrol gantry price by N100, bringing the ex-depot rate from N774 to N874 per litre. This adjustment represents an increase of approximately 12 percent, which is expected to have a cascading effect on retail pump prices across the country.

Causes of the Price Adjustment

The price hike is attributed to several factors, including rising global crude oil prices, which have been exacerbated by geopolitical tensions in the Middle East. Brent crude prices have seen a notable increase, and Nigerian crude oil is currently priced $3 to $6 per barrel above the Brent benchmark. Additionally, the Dangote refinery has been facing supply challenges, receiving only five cargoes a month from the Nigerian National Petroleum Corporation (NNPC), which falls short of the 13 cargoes required for optimal operations.

In light of these challenges, the refinery has absorbed 20 percent of the cost escalation to cushion the domestic market. However, the new gantry price now stands at N995 per litre, marking a N221 rise within just four days. This rapid increase raises questions about the refinery’s ability to maintain supply while ensuring affordability for consumers. Imported petrol is currently priced at N809.83 per litre, making it N64.2 per litre cheaper than Dangote’s petrol, further complicating the competitive landscape.

Market Reactions and Future Outlook

The refinery has stated that it will prioritize supply to the domestic market to insulate Nigeria from supply shocks. However, there are concerns that selling petrol below cost would undermine its ability to procure crude, sustain production, and guarantee an uninterrupted supply to Nigerians. The market is currently characterized by high uncertainty, with many stakeholders closely monitoring the situation.

Uncertainties Ahead

Details remain unconfirmed regarding the full impact of the price increase on retail pump prices across Nigeria. Additionally, the long-term effects of ongoing geopolitical tensions on crude prices and supply remain uncertain, leaving consumers and businesses alike in a state of apprehension.

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