The downstream oil sector in Nigeria is witnessing a fierce price war as major oil marketers undercut the N825 per litre gantry loading cost set by Dangote Petroleum Refinery. This follows a significant drop in the landing cost of imported Premium Motor Spirit (PMS), also known as petrol, to N774.72 per litre. The reduction has sparked a shift in market dynamics, with retail marketers increasingly opting for cheaper imported products over locally refined ones.
Key Developments in the Price War
- Landing Cost Drops: The landing cost of imported petrol has fallen to N774.72 per litre, a N50.28 reduction from Dangote Refinery’s N825 per litre. This cost includes shipping, import duties, and exchange rates.
- Pump Price Reduction Expected: Industry stakeholders predict that the drop in landing costs could lead to a reduction in pump prices to around N800 per litre.
- Competitive Pricing: Following NNPC’s recent price reduction to N860-N880 per litre, private depots have further slashed prices. For instance, AA RANO, MENJ, and MRS TINCAN are now selling at N830 per litre, while others like WOSBAB and AITEO are offering prices as low as N832 per litre.
Impact on Dangote Refinery
The price war has put pressure on Dangote Refinery, which recently reduced its ex-depot price from N890 to N825 per litre. However, marketers are now favoring private depots, where prices are more stable and competitive.
“The refinery price is N825 per litre, and marketers will pay N9 for NMDPRA fees and other levies, making a total of N834 per litre,” explained Olatide Jeremiah, CEO of petroleumprice.ng. “Even as I speak, marketers that bought from Dangote and still have old stock are selling at zero profit. Many depots are now selling at N830, and marketers at the Dangote refinery are selling between N834 and N835 to finish their stock.”
Marketers’ Shift to Private Depots
The fluctuating prices have made marketers uncomfortable, leading them to patronize private depots for greater price stability. “The back and forth of prices has made marketers uncomfortable. They are counting their losses, and that is why they now patronize private depots where there is a bit of stability,” Jeremiah added.
Calls for Regulation
Despite the deregulation of the downstream sector, the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN) has called for regulations to stabilize prices. PETROAN’s Publicity Secretary, Joseph Obele, emphasized the need for a rule that limits price changes to once every six months.
“Despite deregulation, there is a need for a regulation that will make it mandatory that prices can only be changed after six months,” Obele stated. The association also advocated for continued imports to prevent monopolistic practices.
Broader Implications
The ongoing price war highlights the challenges faced by Nigeria’s downstream oil sector, particularly in balancing local refining capacity with imported products. While Dangote Refinery’s entry was expected to reduce reliance on imports, the current price dynamics suggest that imported petrol remains a competitive alternative.
As the situation evolves, industry experts predict that Dangote Refinery may be forced to further reduce its prices to remain competitive. Meanwhile, consumers stand to benefit from lower pump prices, albeit amid ongoing market volatility.
The price war underscores the need for a balanced approach to regulation and market competition, ensuring stability for both marketers and consumers while fostering growth in Nigeria’s refining capacity.