The Dangote Oil Refinery and Petrochemical Plant has started selling diesel, leading to lower prices for Nigerians who rely on it for energy, DARE OLAWIN reports
The Dangote refinery's sale of diesel locally has contributed to a significant drop in prices in Nigeria, which is expected to reduce production costs.
According to The PUNCH, the pump price of Automotive Gas Oil has decreased from about N1,700/litre a few weeks ago to around N1,350/litre in some areas after the Dangote refinery started selling the product.
The $20bn refinery began supplying diesel to the domestic market last week, selling at least 1 million litres to registered oil marketers, who have been getting the product since the start of diesel sales.
Officials of the Dangote refinery and some oil dealers confirmed that they sold the product to marketers at prices ranging from N1,225/litre to N1,300/litre, and the refinery plans to release Premium Motor Spirit domestically in May.
Abubakar Maigandi, the National President of the Independent Petroleum Marketers Association of Nigeria, stated that Dangote's actions would lead to a drop in diesel prices, citing a recent high of about N1,700/litre.
“They are selling at N1,225/litre and the minimum volume they are giving is one million litres per marketer. Also, they assured us that they will release more products, but for now, this (diesel) is what they are starting with. So we are expecting them to release PMS anytime from now.”
Maigandi said, “The price of diesel is going to fall because of the release of products from Dangote refinery. It is already coming down in Lagos.”
A diesel distributor in Ogbomoso, Oyo State, Kayode Lawal, said the pump price of diesel was between N1420 and N1500 as of Tuesday.
Also, Bose Opeyemi, an attendant in Badagry Lagos State, mentioned that the product sold at N1,395 in some parts of Badagry, while some filling stations sold at N1,450. In Abeokuta, the Ogun State capital, Saheed Babalola, who is a quarry agent, said he got a litre of AGO at the rate of N1,45O.
As per data from the Major Energies Marketers Association of Nigeria, diesel prices rose from about N900 in January to around N1500 in March 2024. In some areas, diesel was selling for about N1,700.
A report by the National Bureau of Statistics revealed that the average retail price of Automotive Gas Oil (Diesel) paid by consumers increased by 50.20 per cent from N836.91 per litre in February 2023 to N1,257.06 per litre in February 2024.
On a month-on-month basis, the average cost rose by 9.02 per cent from N1,153.01 in January 2024 to N1,257.06 in February 2024.
Looking at the differences in the states’ prices, it was found that the average price of diesel in Akwa Ibom State was N1,525; N1,500 in Gombe State and N1,444 in Kwara as of February.
With the sudden increase in the value of the dollar compared to the naira between February and March, the price of diesel also rose, adding more financial pressure on businesses, especially when public supply is low.
As businesses largely rely on diesel to operate their factories and trucks, the amount spent on energy skyrocketed, significantly inflating the cost of production which ultimately affects the prices of goods and services. It is worth noting that diesel, which was sold for less than N400 in 2021, has also led to a significant increase in the transportation costs, impacting the transportation of finished goods, farm produce, petroleum products, and others from one place to another.
The Manufacturers Association of Nigeria informed The PUNCH on Wednesday that the cost of diesel represented about 35 percent of the total operational cost in many organizations.
Our reporter found that the energy expenses for many companies increased by a large margin in 2023, compared to what was spent in 2022. The BUA Cement factory reportedly experienced an 86.5 percent rise in its energy cost, from N91bn in 2022 to N123bn in 2023. Similarly, Dangote Cement’s energy cost allegedly increased to N399bn from N266bn in the same period, while Lafarge spent N75bn on energy instead of N62bn.
The President of the Consumer Protection Network, Kunle Olubiyo, informed our reporter that many factories like those involved in plastic production do not depend on public power supply because a power outage during production would be disastrous for the factory. In those organizations, diesel is the sole source of energy, with a 100 percent reliance on it.
The leader of a media organization disclosed to our reporter that the company spent over N30m on diesel weekly as of January, and mentioned that the amount increased as the price went up.
A block maker in Abeokuta, who goes by the name Oladayo, mentioned that he had to switch from his diesel-powered generator to a gasoline engine when the cost of diesel started eating significantly into his income.
Given the apparent decrease in the price of diesel at the moment, Nigerians are hopeful that the prices of products will decrease, as this would result in a reduction in the cost of operating businesses.
However, the MAN President, Francis Meshioye, stated that it is too early to determine the impacts of Dangote diesel on the economy.
“It is too early to determine the impact. The manufacturers don’t buy fuel every day. Anything anyone says now is merely an assumption. Have we collected information from other members? Can anyone obtain credible information in 24 hours? It will be a forecast.
Meshioye stated that it would be best to wait until manufacturers begin replenishing their fuel to see if the reduction in diesel price is making a difference.
While stressing that the cost of diesel has been affecting business, accounting for about 40 percent of the production cost, Meshioye mentioned that manufacturers would welcome anything that would lower the cost of diesel, as it would positively impact the bottom line of businesses.
He stated that the expensive diesel is impacting their business, constituting 35 to 40 percent of their production cost. Any reduction in diesel price would be welcome, as it would enhance manufacturing profitability and lower energy costs for businesses, leading to reduced borrowing expenses and improved bottom line.
The president of MAN requested that all refineries should be operational to lower the cost of diesel.
He also suggested using natural gas as an alternative fuel for businesses, advocating for it to be sold in local currency instead of dollars. He proposed the installation of pipelines nationwide and the adoption of renewable energy sources to make gas more accessible to manufacturers.
The Chief Executive Officer of Zeta Power, Kyriakos Schizas, advised business owners to cut their daily running costs by using compressed natural gas. He mentioned that companies could save over 50 percent of their current energy generation expenses by converting their diesel engines to CNG. However, the lack of CNG stations and pipelines, along with the high cost of engine conversion, has been a major obstacle.
The president of MAN reiterated that diesel accounts for over 35 percent of their costs and expressed the significance of a potential reduction to 20 percent.
