As Nigerians wait for the arrival of petroleum products from Dangote’s multi-billion refinery project, the company stated on Wednesday that its pledge to start producing by July/August was still on track because the month had not yet come to a close.
The refinery’s first goods will be available on the market by the end of July or the start of August of this year, according to billionaire industrialist Aliko Dangote of Nigeria, who made the announcement at the facility’s opening in May 2023.
Nigerians are curious to know how the project will affect the price of Premium Motor Spirit (PMS) with 19 days left in the month and the new gasoline pump pricing, as well as oil marketers’ calls for the Port Harcourt refinery’s ongoing restoration to be finished.
Dangote’s spokesperson, Anthony Chiejina, gave a curt answer to the Nigerian Tribune, saying, “July hasn’t ended, and August is still here. You could visit the refinery, and we’ll transport you there.
While this is going on, Mele Kyari, the Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Company Limited (NNPCL), recently stated that Nigerians shouldn’t anticipate that domestic production of PMS by Dangote, Port Harcourt, and other refineries will have an impact on gasoline pump prices.
There is a belief that prices will drop if the product is produced locally, he claims. Let me be clear: Nothing will change as a result of it. Local production will be sold at the current price after the refineries factor in the cost of production and other factors.
Because there is no cash-to-back subsidy and our nation no longer has the resources to continue with subsidy, Kyari added, “There will also be no subsidy when local production starts.”
Wumi Iledare, a former president of the Nigeria Association for Energy Economics and a professor emeritus of petroleum economics, reacted to this by asserting that if Nigeria’s dealings with Dangote are carried out in local currency, the addition of the refineries would have an impact on prices.
I don’t anticipate Dangote to sell petroleum goods to the Nigerian market in dollars, and I also don’t expect NNPC refineries, when they join the team, to sell petroleum products to Nigeria in dollars, the man stated.
However, nothing prevents Nigeria from selling crude to the Dangote refinery using its own currency, which would minimize the impact of exchange rates on PMS. This is when considering equity crude for Nigeria’s upstream output.
He emphasized that the nation may imitate Saudi Aramco in terms of how they price their commodities to Saudi refineries by keeping in mind that the present price of gasoline is mostly influenced by the exchange rate, the price of crude oil internationally, and freight costs.
Nigeria can do this without intervention from the foreign exchange market, just as they can use Naira instead of dollars to pay for other manufacturing components. If the refining capacity is situated in Nigeria, I believe it is likely that the price of PMS won’t be excessive.
Mr. Bala Zakka, an oil and gas analyst and petroleum engineer, noted that the refinery in question is a privately funded project with the primary purpose of profit maximization and cost cutting.
And whenever we discuss the refinery, nobody ever brings up how they raised the money. They most likely obtained the funding for such a private endeavor from shareholders’ or creditors’ finances. They will pay dividends if they received it from shareholders and interest plus the capital if they received it from creditors. Therefore, they must maximize profit if they want to stay in business and make all of these obligations.
However, he pointed out that because crude oil would be delivered locally to the refinery, transportation, insurance, and security costs would be affected, leading to a comparably less expensive petroleum product.
In a similar vein, he asserted that the construction of state-owned refineries would be a more long-term solution that would apply to all OPEC members.
According to him, doing so would provide security and ensure that Nigerians could purchase refined petroleum products at fair prices.