In a dramatic turn of events, the Dangote Petroleum Refinery has slashed the ex-depot price of Premium Motor Spirit (PMS), commonly known as petrol, from N950 to N890 per litre.
This decision, which took effect on Saturday night, has sent shockwaves through the petroleum sector, forcing marketers to navigate significant financial turbulence.
Industry insiders believe that the price reduction was a strategic response to growing concerns that traders were contemplating importing foreign PMS, which remained more affordable than the locally refined counterpart.
The move underscores the competitive dynamics of Nigeria’s deregulated petroleum industry and the economic pressures at play.
Announcing the reduction, Dangote Refinery’s Group Chief Branding and Communications Officer, Anthony Chiejina, highlighted global energy market trends and declining crude oil prices as key factors.
“This price adjustment aligns with market realities and ensures that consumers benefit from changes in international crude oil prices,” Chiejina stated. The refinery urged petroleum marketers to pass on the benefits to consumers to alleviate economic pressures on Nigerians.
While the move is widely seen as a relief for Nigerian consumers and businesses, many petroleum marketers are grappling with unexpected losses.
Those who procured PMS at the previous price of N950 per litre just before the reduction are now faced with selling below cost, leading to financial setbacks worth millions of naira.
Hammed Fashola, Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), acknowledged the mixed impact of the development.
“Marketers who stocked up before the price cut have to sell at a loss. That’s the challenge of deregulation,” he noted.
He stressed that price fluctuations necessitate a cautious approach when purchasing fuel stocks to minimize financial risks.
As competition intensifies, marketers are left with no choice but to lower prices in alignment with the new reality. “If a marketer refuses to reduce the price, competitors who purchase at the lower rate will attract all the buyers. It’s a tough situation, but we have to adapt,” Fashola explained.
The Dangote refinery’s decision to lower prices follows threats from traders to import foreign PMS, which was perceived to be cheaper than the locally refined variant.
“Dangote had to react to this. If imported PMS remains cheaper, people will naturally buy the cheaper option,” Fashola said.
The price cut is also expected to influence the Nigerian National Petroleum Company Limited (NNPC) and other major players.
Billy Gillis-Harry, President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), noted that NNPC might be compelled to adjust its prices to remain competitive. “There’s a high possibility NNPC will follow suit. That’s the nature of competition,” he said.
While marketers navigate financial losses, consumers stand to benefit from the lower fuel prices. Analysts predict that cheaper petrol will drive down transportation costs, reduce inflationary pressures, and ultimately improve the overall cost of living for Nigerians.
“This is a positive step for the economy. Reduced transport costs will enhance business operations and boost economic activities,” Gillis-Harry remarked.
Chinedu Ukadike, National Publicity Secretary of IPMAN, recalled how Dangote’s entry into the market earlier in 2024 led to a significant drop in diesel prices.
However, he cautioned that marketers suffered heavy losses due to fluctuating fuel costs. “Marketers now fear lifting large quantities of fuel due to price volatility,” he said.
As the petroleum market adjusts to the new price structure, industry stakeholders continue to grapple with the far-reaching implications of the latest development.
For now, consumers may enjoy some relief at the pump, while marketers recalibrate their strategies in a fiercely competitive environment.