Not a few Nigerians have noticed the recent price war of sorts between imported fuel and locally refined variety, which has ensued with the new dispensation of increase in local refining capability by Nigeria. The war formally ensued with the coming on stream of the 650,000 barrels/day Dangote Petroleum Refinery and Petrochemical Company Limited in 2024. For a long time until then, Nigeria depended on imported petroleum products following the dilapidated state of the four local, government-owned refineries operated by the Nigerian National Petroleum Company Limited (NNPCL), with the most prominent of such products being petrol (more popularly referred to as fuel).
Hence in that situation the price of fuel across the country, was dictated by the interplay of global oil market politics and the intervention by the Nigerian government through the provision of subsidy on the price of the product, in order to deliver same to the public at controlled prices. That was until May 29 2023, when at his inauguration as Nigeria’s president, Bola Ahmed Tinubu removed the subsidy.
So also was ushered in a season of turbulence in petrol pricing with debilitating impact on the country as the government had no contingency plans for the shock impact on the citizenry. This was even as the Nigerian National Petroleum Company Limited (NNPCL) – being the main importer of fuel, had a field day in dictating the quantity and price of fuel across the country. Just as well, while the NNPCL was the dominant importer of petrol, there were other importers of smaller consignments whose impact on the price regime was noticeable.
That was until the advent of Dangote’s facility, which would change the fuel market dynamics and the pricing regime. Although the country had other refineries beyond Dangote’s, its 650,000 b/d capacity which literally dwarfs the combined capacities of all other refineries in the country, put it in a class of its own whereby it could dictate the fuel market parameters. Hence was launched the open battle for market share and pump price between Dangote’s with its locally refined fuel and the imported variety from importers led by the NNPCL.
To many Nigerian motorists, the development remains welcome as it shows the play-out and advantage of competition in the market, with the promise of lower prices and more transparency. Interestingly, the downward movement of pump prices may have commenced even if not dramatically.
Put in context the ongoing price war between imported and locally refined fuel is the latest face of the deregulation of the price of petrol, which has manifested in the variations in the prices of the commodity with great expectations that the pump price of fuel will sooner than later, come down below the N1000/litre mark, given the price war. This expectation is shared by Nigerians motorists across the country.
The root of this war was sown with the deregulation of the fuel market with the advent of the Petroleum Industry Act (PIA) in 2021 and the scrapping of the Petroleum Products Pricing Regulatory Authority (PPPRA). Following the development, the pump prices of petrol had initially started jumping up as different importers brought in equally different grades and quantities from different parts of the world. However, the final seal on deregulation came in October 2024, with the implementation of the crude oil and refined product sale in Naira, which made the local currency the formal medium of transactions for the purchase of crude oil as well as sale of refined product directly from refineries.
Meanwhile, in the circumstance of open market competition, questions are trending over the fortunes of the four government owned refineries in Port Harcourt, Warri and Kaduna, with concern that the ongoing price war may consume them. The question is whether they will survive the onslaught of the vagaries of competition where cost of production and eventual pump price will define market share.
The concern is that these government owned refineries may not survive for long due to factors comprising their advanced ages, outdated technology, bureaucratic bottlenecks and political interference by the powers that be. The combined impact of these factors will definitely place their future in the balance.
Given that the price war has come to stay, the government needs to decide on time what to do with the refineries, for as long as they remain under the NNPCL they remain waste pipes or at best low quality assets that will be maintained at the expense of public funds that should have been deployed more gainfully elsewhere.
For long talks have been trending over handing them over to private sector managers to operate. Yet even with private sector managers, these plants will still face competition and failures.
In the circumstances, the way forward is for government to demonstrate proactive disposition in deciding the future of these plants. Given the challenging state of the Nigerian economy this is hardly a time for frivolous and questionable expenses that can be avoided.
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