Why Dangote may not offer cheaper petrol – Expert

Dangote Refinery, Aliko Dangote

Why Dangote may not offer cheaper petrol – Expert

Oil and gas analyst Henry Adigun has explained that the costs involved in producing petrol at the Dangote Refinery in Lagos, which are influenced by dollar-based expenses, may prevent it from selling fuel at prices lower than those of the Nigerian National Petroleum Company Limited (NNPCL).

During an appearance on Inside Sources, a socio-political show on Channels Television, Adigun noted that the high-quality petrol produced at the $20 billion refinery is one factor that will influence its price. He added that the production of fuel is a dollar-dependent industry, allowing Aliko Dangote, the owner of the refinery, to determine the pricing based on the costs involved.

“Dangote incurs significant expenses. He only receives 40% of the crude from NNPCL and purchases the remaining from countries like the United States. Additionally, his refinery uses a single-train system, which means he needs to blend Nigerian crude with foreign crude for production,” Adigun explained.

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He further emphasized that Dangote secured loans in US dollars, not naira, and is required to repay these loans in dollars, contributing to the overall costs. When asked about the potential price of petrol from Dangote’s refinery, Adigun estimated it to be no less than ₦850 per litre due to these operational expenses.

Nigeria, despite being Africa’s largest economy, remains dependent on imported refined petroleum due to the inactivity of its state-owned refineries. As a result, petrol prices have significantly increased, particularly after the removal of subsidies in May 2023. This has intensified fuel scarcity and pushed prices from ₦200 to around ₦800 per litre, affecting citizens who rely heavily on petrol to power both vehicles and generators, especially in the face of unreliable electricity supply.

The Dangote Refinery, which began partial operations in December 2022, is poised to reach full production capacity of 650,000 barrels per day by the end of the year. It has already begun supplying diesel and aviation fuel, with plans to start petrol distribution once ongoing arrangements with the NNPCL are finalized. The NNPCL has announced that it will begin lifting petrol from the Dangote Refinery by mid-September, as the country continues to grapple with its energy challenges.