Dangote Refinery implemented a price reduction for ex-depot petrol in December, decreasing the price from N970 to N899.50 per liter. Concurrently, a collaborative agreement with MRS Petrol stations was established to provide petrol at a retail price of N935 per liter nationwide.
Aliko Dangote, President of Dangote Industries Limited, stated that the price reduction of PMS was largely influenced by the intricate dynamics of market forces. This situation has led to what some are calling a price war in the downstream sector, prompting the Nigerian National Petroleum Company Limited to lower its ex-depot price to N899 per litre.
Following these price adjustments, NNPC retail outlets in Lagos and surrounding areas have updated their prices to N925 per litre. Consequently, several major marketers have been compelled to sell petrol for less than N1,000 per litre, with prices ranging from N990, N980, N950, to N935.
Despite these reductions, many filling stations are still charging over N1,000 per litre. In various locations across Lagos, Ogun, and other states, prices can reach as high as N1,070 per litre. While some stations have made adjustments, they are still selling petrol at prices around N1,050, N1,030, N1,010, or N1,000 as of Wednesday.
The price differences between these stations and those operated by major marketers have contributed to the long queues at the latter. In an interview, Hammed Fashola, the National Vice President of the Independent Petroleum Marketers Association of Nigeria, noted that marketers are still dealing with the old stock purchased at previous prices. He emphasized that the price reduction cannot be implemented instantaneously.
“Some of our members have old stocks. So, there’s no way they can just start immediately. It’s only when they go back to the market to purchase at the lower price, then they will start selling at the new price. If you look around, as of yesterday, I see many of our members have come down to N940 or N935 in Lagos. So, by next week, you will see more of them. Once they finish with their old stock, they will start selling at the reduced rate,” Fashola stated.
He reports that marketers recognize the competitive landscape and are proactively striving to maintain a leading market position.
“You cannot deceive yourself. This is competition. This is what we have been asking for. So, if you like, put your fuel at N1,500, nobody will buy it. So, it’s not deliberate. If you are still seeing a few of us that are still selling at N1,000, it is because of the old stock. Once they finish with their old stocks, they will start selling at the lower price,” he emphasised.
Responding to the observation that fuel stations would not have maintained the previous price if costs had increased, Fashola stated that a business's primary objective is sustained operation; therefore, significant losses could lead to closure, a natural consequence of market dynamics. However, the IPMAN Vice President asserted that many marketers are currently experiencing losses due to the price reduction.
“Even at that, some of us still make losses. I can tell you that some people when their stock gets to a level that they can bear the loss, they will reduce their prices. I can take myself an example. Some of my stations yesterday, when we looked at our stock, maybe we had 20,000 litres in some of our stations, we calculated our losses and I thought it was minimal. So, we reduced our prices despite being the old stock.
“That’s the truth. That’s because people are running away. That’s the reality. Many of our members are doing that too. When they calculate the loss and they can bear this loss, they fix a new price,” he stated.
While acknowledging the positive impacts of deregulation, Mr. Fashola observed that it also presents certain negative consequences.
“The negative effect of deregulation is like what we are just discussing. If you buy a product at maybe, N1,000 today, and tomorrow, the price goes down to N950. You’ve already recorded a N50 loss. You buy a product today from a depot and the following day, the price goes down. Have you finished that stock? It’s not possible. That is the negative aspect of it. Therefore, you have to be careful. You have to go with information before you make your purchases, even before you make your imports.
“And there are some factors you have to consider. That is the exchange rate and the crude oil price. Those are the major factors that determine the price of petroleum products. So, you have to be futuristic. You have to be able to project very well before you make your move. Otherwise, you enter into trouble. That is one of the negative aspects of deregulation. But, we have to cope with it,” he explained.
The marketer expressed concern that current industry players are grappling with financial difficulties due to the elimination of fuel subsidies.
With the price of Premium Motor Spirit (PMS) escalating from N200 to N1,000 per litre, Fashola noted that marketers are struggling to operate, particularly as bank interest rates continue to rise each month.
“When you go to the bank, you know the interest you will pay. So, which way? We need more money to remain in business–more money, but with a little margin. This is really impacting on us. But we all call for deregulation and we have to live by it. We don’t have an option,” he added.
Fashola urged marketers to brace themselves for the forthcoming challenges, acknowledging the new realities and trends, stating, “We cannot continue to conduct our business as we did in the past.”
Meanwhile, Joseph Obele, the National Publicity Secretary of the Petroleum Products Retail Outlet Owners Association of Nigeria, indicated that none of the association's members have purchased fuel at the lower rate.
“None of our members has bought at the reduced rate at the moment,” Obele explained, which accounts for why some filling stations continue to sell PMS at elevated prices.
He further pointed out the significant price differences for PMS between Lagos and Port Harcourt, as well as other locations distant from Lagos.