NNPC Eyes Discounts from Dangote Refinery Amid Rising Fuel Costs in Borno

Introduction

The Nigerian National Petroleum Company (NNPC) Limited is currently negotiating with Nigeria’s Dangote Refinery for potential discounts on the supply of Premium Motor Spirit (PMS). An effort that comes at a crucial time as fuel prices skyrocket across the nation, particularly in Borno State, where the cost per liter has reached an unprecedented N1,019.22 per liter. This move aims to lessen the economic strain on consumers who are already feeling the pinch.

Current Fuel Prices in Nigeria

According to recent pricing data released by the NNPC, there are stark regional differences in fuel prices across Nigeria. In Borno State, the cost of PMS has hit a high of N1,019.22 per liter, setting a new record. In contrast, consumers in Lagos face the lowest prices at N950.22 per liter. The NNPC attributes these variances to factors such as transportation costs and distribution challenges, which vary from region to region. Other states like Sokoto and Kaduna also grapple with high fuel prices, at N999.22 per liter each, while residents in Oyo State pay N960.22 per liter.

The Role of Transportation and Distribution

The discrepancies in fuel prices across different states highlight the significant role transportation and distribution costs play. Remote regions such as Borno import additional logistical expenses, thereby escalating the final pump price. Urban areas like Lagos, in contrast, benefit from more efficient distribution networks, contributing to relatively more affordable fuel prices.

Breakdown of Fuel Pricing

The pricing structure for PMS is intricate and multi-faceted. Based on the Platts10ppm rate of $690 per metric ton as of September 13, 2024, this translates to $0.52 per liter or N842.61 per liter. The Dangote Refinery’s gantry price, however, stands at $736 per metric ton, which equates to N898.78 per liter. Additional fees further inflate the prices, including the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) fee of N8.99, an inspection fee of N0.97, and distribution costs of N15.00 (specifically for Lagos). A margin of N26.48 is also included, contributing to the consumer’s final pump price.

Government and Regulatory Aspects

It’s important to note that the Nigerian government does not directly set these prices. Instead, they are a product of complex negotiations carried out under the Petroleum Industry Act (PIA) Section 206 (1). Payments for the September consignment to Dangote Refinery are being made in U.S. dollars, thereby highlighting the significance of any potential discounts that could be offered.

Clarifications from NNPC

In a bid to clear up any public confusion, Olufemi Soneye, Corporate Communications Manager of the NNPC, clarified that rumors circulating about buying PMS at N1,300 or N760 from Dangote were inaccurate. According to Soneye, the current loading price is indeed N898. However, Dangote Refinery has pointed out that it sells its products to NNPC in dollars, which can lead to further fluctuations in price depending on exchange rates.

Changes on the Horizon

As of October 1, an important development is expected to take place: the sale of crude oil in naira, which may lead to the sale of petrol in naira between NNPC and Dangote Refinery. This shift may stabilize prices somewhat, reducing the pressure on the NNPC to seek discounts. Nonetheless, the NNPC has remained adamant that any savings or discounts they manage to secure from Dangote Refinery will be passed on entirely to the consumers, offering a glimmer of hope for many struggling with the current prices.

Conclusion

The situation continues to evolve, and the public remains hopeful that the negotiations between NNPC and Dangote Refinery will result in some much-needed financial relief. With prices peaking in different parts of the country and logistical costs adding a substantial burden, any potential discount could make a significant difference. As the nation waits, one can only hope that a favorable resolution is on the horizon, offering respite to millions of Nigerians affected by these surging fuel costs.