FG may cut N6tn fuel imports due to Dangote petrol supply

If the Dangote Petroleum Refinery starts selling premium motor spirit as promised by Dangote Group Chairman Aliko Dangote, the Federal Government may reduce its about N6.2 trillion annual fuel import expenditure.

Speaking at the Africa CEO Forum Annual Summit in Kigali, Rwanda on Friday, Dangote gave Nigerians his word that starting next month, the country would not need to import petrol thanks to the refinery’s planned developments.

President Bola Tinubu eliminated gasoline subsidies on May 29 of last year, according to a National Bureau of Statistics study, which brought down the nation’s petrol imports to an average of one billion litres each month.

Dangote claims the $20 billion refinery will provide all of West Africa’s aviation fuel demands in addition to its petrol and diesel needs.

“Apart from petrol, Nigeria has no reason to import anything right now, and by sometime in June, within the next four or five weeks, Nigeria shouldn’t import anything like petrol; not even one drop of a litre,” he declared.

“We have enough diesel to give to West Africa and Central Africa and enough petrol to give to at least the whole of West Africa.” There is enough aviation fuel to supply the whole continent and even export some to Mexico and Brazil.

By next month, we will be manufacturing petrol in addition to diesel and jet fuel. It will be capable of taking most African crudes, that much is certain.

If Dangote’s promise comes true, the nation would spend less than N6.2 trillion a year on PMS imports.

With the Nigerian National Petroleum Company Limited, the sole importer of the product, charging an average of N670 per litre for the product, marketers estimate that the average landing cost of petrol is presently N520 per litre.

The operators also fixed the average difference between the pump price and PMS landing cost at N150/litre.

With a 1 billion litre average monthly consumption, Nigeria now imports PMS at a cost of about N520 billion. That works up to N6.2 trillion yearly.

With Dangote slated to provide PMS in June, operators and industry analysts anticipate significant savings for the nation from the removal of shipping and other importation-related costs.

Operators claim there is a N150 per litre discrepancy between the landing fee and the petrol pump pricing.

Landing cost is the entire cost of transporting a cargo from a foreign nation to Nigeria, covering all costs from the time of manufacture till delivery.

Many times, refined petroleum products enter the nation through Atlas Cove and are then moved to jetties by daughter vessels. Tanks receive the gasoline from jetties.

The expense of transporting PMS from the port to different filling stations around the nation is cited by marketers as the reason for the N150 discrepancy between the landing cost and the pump price. This covers, among other expenses, marine fees and levies from the Nigerian Ports Authority.

Diesel, aviation fuel, and other petroleum products cost differently than PMS landing.

Converting the N6.2 trillion to dollars at a rate of N1,520 per dollar, the nation spends $4.16 billion on average every year. There are claims, though, that the NNPCL imports PMS for more money than this.

The naira should appreciate when Dangote’s pledge comes to pass.

 

Industry studies state that Nigeria spends at least $10 billion a year importing diesel, aviation fuel, PMS, and other petroleum products.

Analysts estimate that fuel imports account for no less than one-third of the nation’s yearly foreign exchange spending.

A reputable Central Bank of Nigeria source claimed that the country’s economy would see a good change when the Dangote refinery starts supplying petroleum in June.

The source said that by stopping fuel imports, the demand for foreign exchange will significantly decline, which will improve Nigeria’s economic situation.

The naira would recover strength, the source added, as the demands on currency decreased.The CBN insider stated, “The naira will rebound and that is good for the economy as the dollar demand reduces.”

Olufemi Soneye, the NNPCL spokesman, refused to respond when reached.

Soneye stated the NNPCL is no longer a company and was unable to address the effects of the Dangote refinery.

Sunday saw no response to calls or messages to Mr. Mohammed Manga, the Ministry of Finance’s Director of Press and Public Relations.

The Director of Corporate Communications at the Central Bank of Nigeria, Hakama Sidi Ali, did not answer calls placed to her phone. A message left on her line was still unanswered.

But according to Dr. Muda Yusuf, Director-General of the Centre for the Promotion of Public Enterprise, the start of petrol refining by the Dangote refinery would revolutionise the Nigerian economy, particularly in terms of the impact on the foreign exchange market and domestic energy costs.

Currently, Yusuf pointed out, petroleum items account for almost 30% of Nigeria’s import cost.

Throughout the ten years, this is expected to cost between $10 billion and $15 billion yearly. This would mean that demand pressure on the foreign exchange market would be significantly reduced, he said.

“Already we have seen the impact of the domestic refining on diesel and aviation fuel imports,” Yusuf said. Prices have even come down. The exchange rate should consequently be significantly impacted, in my opinion.

But how much of the crude feedstock the refinery can obtain locally would determine how optimistic this picture is. The hope for the foreign exchange effect may have to be checked if the refinery has to import crude oil. For that would mean some substantial foreign exchange outflows for the importation of crude.

He said Nigeria is probably going to import less petrochemical goods and other related byproducts from the refining process.

Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, expressed worries that the majority of the nation’s foreign money goes into gasoline importation and said that Nigeria does not need to buy petroleum during an energy conference held recently in Abuja.

We have to work out a solution for our FX issue. Petrol imports are not necessary for Nigeria. We ought to release some of our limited forex for use in other economic areas.

I am conscious that the importation of refined oil products uses up the majority of our foreign exchange. Lokpbiri was upbeat, predicting that gasoline imports would stop with domestic refineries.

Fuel marketers said they have finalised arrangements to meet with Dangote to talk about possible price cuts when his refinery begins to produce PMS next month.

Organising under the Independent Petroleum Marketers Association of Nigeria, the marketers planned to meet with Dangote on Sunday in order to work out a bulk purchase discount.

Nigeria’s inability to increase output has left Dangote’s 650,000 barrels per day refinery scrambling to obtain crude supplies from the US.

The biggest refinery in Africa and Europe has started selling diesel and aviation when it reaches full capacity; petrol has not yet been released.

Diesel prices were lowered by Dangote in April from about N1,500 to N1,000 per litre.

However, Nigerians are currently waiting impatiently for petrol, which is the main fuel utilised for alternative power generation by people, small businesses, and transporters.

Marketers and Nigerians who are still getting over the recent fuel shortage that almost caused the economy in Lagos, Abuja, and other areas of the country to come to a standstill may find solace in Dangote’s pledge to stop importing fuel.

National Vice President of IPMAN Hammed Fashola said to our correspondent that the marketers had asked to meet with the head of the Dangote Group.

An earlier letter to Dangote will be followed up on, according to Fashola, to speed up a meeting and reach an arrangement before PMS is sold.

Fashola has already urged the business to think about dealing with the association directly rather than with individuals.

Being in charge of more than 80% of Nigeria’s filling stations, IPMAN, he said, should be a stunning bride before Dangote.

“We have our letter with them; we are expecting their response; and we will surely do a follow-up,” the IPMAN leader declared. About a month ago, the letter was sent, and we will be following up. We are to Dangote like a ready-made market. Including us in his programme is beneficial to him. I think he would welcome us.

In the meeting with Dangote, he said, the association would ask for a reduction.“You know you have that negotiating power on your strength when you get together as a group. We are going to bargain for a discount, no question. We thus discourage involvement by individual companies,” he said.