Dangote Refinery : ‘Petrol prices unlikely to fall’

 

Industry experts have cast doubt on the likelihood of a significant reduction in petrol prices in Nigeria, even with the commencement of operations at the Dangote Refinery.

In a recent discussion, they indicated that while the refinery might enhance the consistency and reliability of fuel supply, a sudden decrease in pump prices should not be expected.

The Dangote Refinery, with a production capacity of 650,000 barrels per day, has recently started processing petrol, as announced by Devakumar Edwin, the Vice President at Dangote Industries Limited.

The Nigerian National Petroleum Company Limited (NNPC Ltd) is expected to be the exclusive buyer of the refinery’s output, potentially stabilizing the fuel supply in the country.

Aliko Dangote, President of Dangote Group, mentioned that the refined petrol could reach filling stations across Nigeria within 48 hours, depending on NNPC Ltd’s distribution. However, some analysts argue that stability in supply doesn’t necessarily translate to lower prices.

Energy expert Dan Kunle emphasized that the notion of an immediate drop in fuel prices is misguided. “The pricing of petroleum products is influenced by global market dynamics and various economic factors,” Kunle noted. He added that the key to a steady supply and potentially stable prices lies in production capacity and supply chain efficiency, rather than expecting a dramatic price crash.

According to Kunle, a stable supply and production capacity could lead to more predictable prices, though not necessarily cheaper ones. He likened this to the entry of telecommunications companies like MTN and Airtel into the market, where initial prices were high due to the nascent stage of their operations.

“Even if Dangote’s refinery possesses sufficient production capacity, the cost of crude supply at international market rates will directly impact the final petrol price,” he explained. Kunle stated that for prices to drop,