In a development that is shaking Nigeria’s fuel sector, Dangote Petroleum Refinery has reduced its ex-depot price of petrol by a whopping percentage to N840 per liter.Â
That N40 reduction from the previous N880 is coming at a time when crude oil prices globally are declining, further cementing Dangote as one that responds to trends in foreign markets.
This decrease this autumn is an allusion to a 1.54 percent decrease in world benchmark Brent crude, which dropped from its record high $68.67 a barrel of June 23 to $67.61 at Monday’s business close. This decrease, according to Dangote Group Chief Corporate Communications Officer Anthony Chiejina, is directly out of this global trend and proof of the company’s commitment to pricing products within the means of Nigerian customers.
The timing, if anything, is synchronized. Only five days ago, the Nigerian National Petroleum Company (NNPC) Limited increased its pump price in Lagos to N925 per liter. With Dangote’s new price being significantly lower than NNPC’s retail price, stakeholders in the market are eager for intensified competition in the downstream market.
Even more remarkably, however, is the speed with which the refinery turned its own price around. Dangote raised its petrol price to N880 last week. The company’s rate of response to market forces is evidence of a agile pricing policy that would be quicker than senile legacy state-owned ones.
As part of the preparations for mass market penetration, Dangote also will begin nationwide retailing of diesel and petrol on August 15. Over the action lies an investment of over N720 billion in 4,000 new CNG vehicles. The CNG-powered vehicles are to boost capacity for distribution significantly while staying abreast with pace of global green movement.
But the expansion is contentious. Operators in the fuel retailing industry have become more concerned. Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has feared that Dangote’s direct-to-market approach locks out existing fuel retailers and encourages en-masse retrenchment. Major Energies Marketers Association of Nigeria (MEMAN) has also called for greater clarity on how exactly this new model of distribution will exist alongside existing supply chains.
Despite the skepticism, Dangote Group assures that its entry into wholesale distribution will be beneficial to the economy in general. It estimates the savings derivable from the new system of distribution as more than N1.7 trillion yearly through transportation costs and importation dependence reduction.
By cutting prices in half and doubling down on its transport investment, Dangote Refinery is making an announcement that it’s going to own the oil and gas value chain in Nigeria. Whether that’s good for consumers or makes life harder for the market only time will tell—but this much is clear: the energy game in Nigeria is about to change quickly, and Dangote is at the forefront.
