Dangote refinery may not reduce the price of petrol significantly when it begins operations as it will be selling the product at the international price, Minister of Finance, Budget and National Planning, Zainab Ahmed, said on Monday, shattering expectations that refining oil locally would guarantee cheaper fuel.
“There have been a number of refineries that have been licensed for several years. None of them was willing to start refining under the regime that we had where fuel was controlled.
“The Dangote refinery is sitting within an Export Processing Zone so they are insulated from that. When we buy fuel from Dangote, we will be buying fuel at the international market price. The only savings that we will be making is the savings of freight which is shipping,” Mrs Ahmed said on the Nigerian Television Authority’s Good Morning Nigeria programme.
The declaration is coming from the Nigerian government ahead of any statement from the privately-owned refinery regarding the potential pricing of its products.
She noted that components like landing cost, labour cost and the margin added by marketers, all of which are factored into petrol price before Dangote refinery comes on stream, would still be in place when it starts operations.
The only difference will be the removal of shipping cost, meaning Nigerians will pay about the same price for petrol when the refinery starts work as they paid before its operation.
Located in the Lekki Free Trade Zone in Lagos, the refinery with a capacity to process 650,000 barrels of oil per day is expected to meet local demand as well as produce a surplus for export.
She affirmed that the deregulation of the petroleum industry, which triggered the latest hike in pump price, was favourable to the economy given that it would boost investment in refineries.
“It will mean more refineries will open, they will employ people and fuel will be available in different parts of the country and not just relying on the government refineries.
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“Those refineries are old and even if we turn them around, we will not be able to operate them at optimal capacity, so while the NNPC is trying to rehabilitate them, we also need to encourage the private sector refineries to come on stream and even state governments that have the capacity,” she added.
Corroborating the position, Timipre Sylva, the Minister of State for Petroleum Resources, said petrol pump price would not fall reasonably even if the country attained self-sufficiency in petroleum products given that the key determinant of petrol price is crude oil and, as long as crude price remains high, petrol price will not drop.
He added that labour cost would not be different from the international price given that local refineries would be paying expatriates.
“For now, our supply is coming mostly from imports as we all know. And that doesn’t really have an impact on the price as people would think. The only difference that will happen if our supply was coming from in-country would have been the freight price.
“But whether it is coming from outside or coming from within, it will be about the same cost because when you import, the only difference is that you will have to pay the freight. But it is the same cost of crude and whether you are refining or not, you will have to pay the market price for the crude.”
Earlier this month, government announced a hike in the price of petrol at N151.56 per litre with effect from 2nd September after which it said it would no longer fix the price of the product.