The downstream oil sector in Nigeria is witnessing a dramatic price war, as major oil marketers are now offering petrol at prices significantly lower than the gantry loading cost set by the Dangote Petroleum Refinery. This shift, driven by a substantial drop in the landing cost of imported Premium Motor Spirit (PMS), has ignited a fierce competition that could lead to a significant reduction in pump prices for consumers.
I’ve observed a palpable tension within the market as these developments unfold. The data reveals a compelling narrative: the landing cost of imported petrol has plummeted to N774.72 per litre, a stark contrast to the Dangote Refinery’s N825 per litre. This N50.28 difference has become a pivotal factor, prompting many marketers to abandon refinery products in favour of cheaper imports.
“Crude oil is a major component in the production of fuel, so a further reduction in its price would definitely warrant a drop in petrol price, and it is possible to drop to N800 per litre,” stated Chief Ukadike Chinedu, the National Publicity Secretary of the Independent Marketers Association of Nigeria.
This sentiment underscores the potential for consumers to experience relief at the pump. The implications, however, extend beyond immediate price reductions. The intense competition is reshaping market dynamics, forcing key players to reassess their strategies.
The recent price adjustments by the Nigerian National Petroleum Corporation (NNPC), which lowered its retail petrol prices to N860 and N880 per litre in Lagos and Abuja respectively, further intensified the competitive landscape. This move, following Dangote Refinery’s own price reductions, has created an environment where price sensitivity reigns supreme.
For importers, the initial price reductions posed significant challenges, with reported losses averaging N2.5 billion daily and N75 billion monthly. However, a swift business survival strategy has emerged: securing cheaper products that now threaten the refinery’s operational viability.
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The latest data from the Major Energies Marketers Association of Nigeria indicates that the on-spot estimated import parity into tanks has dropped to N774.82 per litre, a significant decrease from the previous N927.48 per litre. This reduction, coupled with a decrease in Brent crude prices and a fluctuating exchange rate, has created a favourable environment for importers.
“The back and forth of prices has made marketers uncomfortable. They are counting their loss and that is why they now patronise private depots where there is a bit of stability,” explained Olatide Jeremiah, CEO of petroleumprice.ng. Jeremiah’s analysis highlights the discomfort among marketers due to price volatility, leading them to seek stability in private depots.
The emotional toll on marketers is evident. They are grappling with losses and seeking a stable trading environment. This instability is causing some to consider a return to government regulations. PETROAN, for instance, has called for a regulation that would mandate price stability for six months, a clear indication of the market’s current volatility and the desperate need for some level of predictability.
The current situation also shows the human element of economic decisions. While the data shows the numbers, the reality is that the constant fluctuation of prices causes stress, and potential loss for business owners. The consumer however, may see a benefit in lower prices, but the long term effects of unstable markets can have negative impacts on the overall economy.
The situation is dynamic, and as Olatide Jeremiah forecasted, it is likely to compel the Dangote Refinery to lower its ex-gantry price to remain competitive. The coming weeks will be crucial in determining the long-term impact of this price war on the Nigerian downstream oil sector.
