The Nigerian National Petroleum Company (NNPC) Limited sold Dangote petrol to marketers at N766 per litre, showing that it still pays subsidies on petrol despite the government denials.

The NNPC lifted premium motor spirit (PMS), also known as petrol, from Dangote Petroleum Refinery on Sunday, but the national oil company and marketers did not agree on price for a few days.

However, BusinessDay reported on Friday that marketers had started lifting petrol from the NNPC, paying N766 for a litre. It quoted Managing Director and Chief Executive Officer of 11 Plc, Mr Tunji Oyebanji.

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“We don’t know the contractual financial arrangement between NNPC and the refinery but what I can confirm is we are buying at N765.99 from  NNPC to lift Dangote petrol,” Oyebanji was quoted to have said.

The subsidy reality

With the NPPC buying Dangote petrol at N898/litre and selling at N765.99/litre, it mathematically means that the national oil company paid at least N132 subsidy for a litre of petrol.

Nigerians consume 50 million litres of petrol each day and N1.5 billion litres per month. In one year, the nation consumes N18 billion litres.

If this trend continues, the NNPC will be paying N6.6 billion daily and N198 billion monthly on petrol subsidies. This equates to N2.38 trillion in petrol subsidies annually.

“The NNPC may not be able to continue in this path as it will erode its earnings and create confusion in the downstream petroleum sector,” said a petroleum economist, Ms Anne Nwazie.

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“If they continue paying petrol subsidies, there will be uncertainties in the market. This is because what will determine Nigeria’s petrol prices from now on will be the exchange rate and the global petrol prices. What then happens if the global Brent price jumps to $100 per litre or the naira weakens to N2,500? It means they may have to pay much, much higher,” she said.

Nigerians may not pay same price for petrol every month

Nigerians may no longer pay the same amount of money for a litre of petrol each month. Going forward, the price of petrol will be determined by the international demand and supply dynamics, Dangote refinery’s production cost and the exchange rate.

Dangote Petroleum Refinery will sell at the international rate going forward, economists say. Marketers will also import to fill the gaps in the local market, which shows that the exchange rate of naira will still influence the price of petrol.

This is irrespective of the NNPC’s petrol subsidies. If the consumers do not pay for the differential, the NNPC will.

“What Dangote Refinery is assuring the country is quality and quantity. That pricing is not necessarily in the hands of Dangote Refinery but in the hands of the market,” Managing Director of Financial Derivatives Company (FDC) Limited, Mr Bismarck Rewane, said recently on Channels TV.

“The market determines the price including the global crude price, guaranteed margin and the cost of processing. It’s as simple as that. Nobody goes into business to sell below its cost price, that is suicide.

“I think we should get that, rather than be carried away by false expectations. Yes, it’s good to know that the petrol is being lifted, it is a milestone from our own refineries which we had before.”

N950 or more

Economy Post had earlier reported that Nigerians will pay about N950.22 for a litre of Dangote petrol at Lagos filling stations and as high as N1,019 per litre in Borno State, according to the NNPC.

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With varied logistics costs, other states in Nigeria will pay for Dangote petrol on the basis of transport and other ancillary costs. A litre of petrol will sell at N999.22 in Abuja, Sokoto, and Kano. Residents of states like Oyo, Rivers and other parts of the South will pay about N960 per litre for Dangote petrol.

Dangote refinery has become Nigerias jewel, but oil marketers is asking the Federal Government to stop it from monopolising the petrol business.

In a statement sent to Economy Post, the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) said, “DAPPMAN as evidenced by patronage of various products from the Dangote Refinery by its members believes firmly in meeting Nigeria’s energy needs ,and remains aligned to calls for the nation not to end up in a monopoly, which will only jeopardise our economic growth and development.”

PRESIDENT Bola Ahmed Tinubu spent N3.6 trillion on petrol subsidy in 2023 and will increase the expenditure to N5.4 trillion in 2024 despite a series of denials and lies by Aso Rock officials, including his ministers, Economy Post reported.