The pricing of Premium Motor Spirit, also known as petrol, which the Dangote Petroleum Refinery plans to discharge next month, is expected to be further discussed by the Nigerian government committee this week.

The committee was established to oversee the execution of crude oil sales to nearby refineries in naira. It will also be holding many meetings this week and in the upcoming weeks on the development.

The hint is based on several sources quoted by PUNCH, including oil marketers and members of the Implementation Committee on crude oil sales in naira, which is led by Wale Edun, the Minister of Finance and Coordinating Minister of the Economy.

The sources added that the Federal Government would have to choose between subsidising petrol from the plant and allowing Nigerians to purchase it at market price. The committee was also expected to finalise a framework that would set a benchmark on the amount that the Dangote refinery would pay for crude in naira.

Last week, it was reported that a deal had been struck between the Nigerian government’s committee set up to oversee the implementation of crude oil sales to local refineries in naira and the Dangote Petroleum Refinery on the September rollout of Premium Motor Spirit, also known as petrol. Additionally, the Federal Government revealed that starting on October 1, 2024, crude oil would be sold to Dangote Refinery and other local refineries.

Nonetheless, oil marketers stated that the price of Dangote petrol would exceed the existing retail pricing, emphasising that dealers would find it difficult to purchase the product directly from the plant if the federal government did not step in to control the price.

Petrol currently retails at between N600 and N700 per litre, depending on the region of the nation. According to data recently issued by the Major Energies Marketers Association of Nigeria, PMS cost N1,117 per litre at the time of arrival. The marketers also clarify that the cost of the product from the Dangote refinery should be approximately this amount and state that this is the real market price of the item.

State enterprise, the Nigerian National Petroleum Company Limited is the only company that imports fuel into Nigeria largely because others do not obtain the US $ needed to import fuel.
However, the company’s Chief Financial Officer, Umar Ajiya, acknowledged last week during the presentation of the audited report and accounts of NNPC for the 2023 fiscal year in Abuja that the oil company was bearing a significant weight of subsidies on petrol imports.

Since the announcement of the removal of fuel subsidies during President Tinubu’s inauguration in May 2023, consumer inflation has risen to unprecedented heights. Some economist have argued that the subsidy regime needed to go because it was unsustainable with the major argument that the government should rather subsidies production and not “petrol consumption”

A major contrast to the “no subsidy” school of thought is that Nigeria, which is one of Africa’s largest economies has continued to struggle with electricity generation for decades as it generates most of its on-grid electricity through thermal and hydro, with an installed capacity of about 12,522 MW but hardly surpasses 6,000 MW generation.

The country’s minister of power, Adebayo Adelabu while speaking at an electricity sector reform programme in December noted that the country has grown to become the host of “probably the world’s largest fleet” of diesel and petrol-powered generators.

According to the minister, “various figures have been mentioned but it is safe to say that this fleet measures no less than 40,000MW of total capacity.” A subsidy on products that fuel alternate energy and production isn’t on consumption after all. It is yet to be seen if local production of refined petroleum will offer Nigeria cheaper products.