The Nigerian National Petroleum Company Limited (NNPCL) has announced that Premium Motor Spirit (PMS), commonly referred to as petrol, from the Dangote Refinery, will begin entering the market starting September 15, 2024.

In a statement signed by NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, and released in Abuja, the company confirmed that the prices of PMS will no longer be regulated by NNPCL or the government but will be determined by market forces. This statement, attributed to NNPCL’s Executive Vice President of Downstream, Adedapo Segun, comes amidst speculation that NNPCL might continue fixing prices even after the sector’s deregulation.

Segun disclosed that the downstream sector is now fully deregulated, and petrol prices will be dictated by unrestricted free market forces, as outlined in the Petroleum Industry Act (PIA).

This recent announcement contradicts previous remarks made by Aliko Dangote, the founder of the Dangote Group. Earlier, Dangote had stated that the government would still have a role in determining the price of refined petrol, even after deregulation. He had indicated that the prices of petrol from his refinery would not be left solely to market forces, raising hopes among Nigerians that prices might remain somewhat controlled.

However, NNPCL’s clarification that prices will be determined by the open market, influenced heavily by foreign exchange fluctuations and global oil prices, means that the Nigerian will have to pay more for fuel. This marks a significant policy shift and underscores the full extent of the deregulation initiative undertaken by the government, leaving no room for direct price controls as previously speculated.

One major challenge highlighted in the statement was the issue of foreign exchange (forex) illiquidity, which NNPCL identified as a critical factor affecting petrol prices. The ongoing scarcity of forex in Nigeria has been directly tied to the volatility in PMS pricing.

Segun explained, “The market has been deregulated, meaning that petrol prices are now determined by market forces rather than by the government or NNPC Ltd. Additionally, the exchange rate plays a significant role in influencing these prices.”

The statement also addressed the ongoing fuel scarcity across the country. Segun assured Nigerians that the scarcity was expected to ease within a few days as more filling stations recalibrate their systems and resume selling PMS. NNPCL is working closely with marketers to ensure extended operational hours at stations, intending to meet the demands of Nigerians and alleviate the current scarcity.

Segun said, “No right-thinking individual would be comfortable with the current fuel scarcity.”

The Dangote Refinery, which is expected to be a game-changer in Nigeria’s fuel supply chain, has long been anticipated to alleviate the country’s dependence on imported refined petroleum products. Once the refinery ramps up production and begins supplying the local market with PMS, it is expected to reduce Nigeria’s vulnerability to global oil price fluctuations and forex volatility.

Segun also hinted at broader economic reforms, which might be necessary to ensure a stable and competitive market for PMS.

NNPCL’s Supply to Dangote Refinery

In addition to the refining timeline, NNPCL revealed that it has already supplied 30 million barrels of crude oil to the Dangote Refinery, with plans to deliver another 17 million barrels soon. Of these, 6.3 million barrels are expected in September, followed by 11.3 million barrels in October, delivered in seven cargoes.

While this substantial supply signals a robust partnership between NNPCL and the Dangote Refinery, Segun expressed concern that current petrol pump prices do not accurately reflect market realities.

“The pump price today is not market reflective,” Segun explained, noting that while NNPCL remains the sole importer of PMS in Nigeria, this is not a sustainable situation.

“NNPCL is the sole importer of PMS in the country, which is abnormal. We should be coming to a situation where the free market determines prices,” he added, indicating a shift towards a fully competitive market.

Addressing Concerns of Monopoly

NNPCL’s role as the sole importer of PMS has been a contentious issue, especially with rumors of monopolistic tendencies. However, Segun clarified that this position was not a deliberate strategy by the company but a response to market conditions.

“NNPCL did not put itself in the position of sole importer. We decided to step in when others reduced their participation in the market. It’s not about us wanting to be monopolists,” Segun clarified.

He also emphasized that achieving price stability and an ideal fuel supply would require a more liquid forex market, as well as broader economic reforms.

“Market conditions need to be perfect, and there needs to be FX liquidity,” Segun said.

Nigerians to Brace for Price Hikes

With NNPCL’s confirmation that it will not interfere with price determination, experts have predicted that fuel prices could spike significantly once Dangote’s petrol enters the market. Already, prices of petrol have surged, with reports indicating that PMS is being sold for as high as N1,200 per liter in some parts of Nigeria due to scarcity. The deregulated market, combined with forex shortages and the broader economic downturn, points to the likelihood of further price increases.

It is important to note that Dangote Refinery has yet to announce the official price at which it will sell refined petrol. However, market analysts have warned that Nigerians should brace for prices around N1,000 per liter or even higher, depending on prevailing market conditions and forex availability.