Nigeria's downstream petroleum market is bracing for fresh pressure after the Dangote Petroleum Refinery switched the sale of refined petroleum products from naira to the United States dollar, a move expected to compel marketers to source about $1.84 billion every month to sustain fuel supply across the country.
The new payment regime has already triggered an increase of more than ₦100 per litre in depot prices of Premium Motor Spirit (petrol), raising concerns over another round of retail price adjustments and renewed inflationary pressure.Industry estimates indicate that petroleum marketers will now require approximately $60.7 million daily to purchase petrol, diesel and aviation fuel from the refinery. Petrol alone accounts for about $36.9 million daily, equivalent to roughly $1.1 billion monthly, based on the refinery's new gantry price of $0.779 per litre.
Diesel purchases are projected to require about $633.5 million monthly, while aviation fuel procurement could gulp an additional $105.1 million within the same period.
The immediate impact of the policy has been reflected in depot prices, with petrol loading costs climbing from about ₦1,137 to ₦1,250 per litre in several locations. Major depots, including Sahara, AIPEC and African Terminal, also reviewed their prices upward.
Diesel prices have equally risen sharply, with ex-depot rates reaching as high as ₦1,650 per litre in some locations.
The development comes only days after the Federal Government expressed optimism that petrol prices would moderate, but international crude oil prices have instead surged to about $85 per barrel, further worsening cost pressures across the sector.
Dangote Refinery had notified customers that, effective July 13, all payments for products loaded through its gantry would henceforth be made in dollars. Existing naira invoices were cancelled, while new prices were quoted in foreign currency. The company, however, retained the existing payment arrangement for Liquefied Petroleum Gas.
The decision effectively transfers foreign exchange obligations to petroleum marketers, who earn their revenue in naira but must now secure dollars before lifting products from the refinery.
Energy economists believe the policy reflects increasing reliance on imported crude oil, suggesting that the earlier naira-for-crude initiative may no longer be supplying enough feedstock to support local refining.
Founder of Energy Business Analytics, Dr Kaase Gbako, said the refinery had effectively shifted foreign exchange risks from crude suppliers to marketers and consumers.
According to him, increased dollar demand by marketers could further weaken the naira while making domestic fuel prices increasingly sensitive to movements in the foreign exchange market.
Petroleum economist Prof. Wumi Iledare noted that while the policy aligns with global commercial realities in a deregulated market, it also introduces fresh operational challenges.
He said marketers would now require stronger treasury management, improved foreign exchange planning and shorter inventory cycles to minimise exchange-rate risks.
Former President of the Nigerian Economic Society, Prof. Adeola Adenikinju, warned that marketers would now operate much like importers despite buying products refined locally, adding that greater demand for dollars could exert additional pressure on Nigeria's foreign exchange market if liquidity remains weak.
Tradegrid Country Manager Jide Pratt argued that although Dangote Refinery is legally permitted to transact in foreign currency as a Free Trade Zone enterprise, the return to dollar pricing raises fresh questions about the effectiveness of the government's naira-for-crude programme.
He called for greater transparency in linking crude supply arrangements with refined product pricing to reduce uncertainty within the downstream sector.
Managing Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, described the currency mismatch between marketers' dollar-denominated procurement costs and naira-based sales as the major challenge facing operators.
He explained that while the impact on retail prices would ultimately depend on exchange-rate stability and international crude prices, businesses exposed to foreign currency obligations would remain vulnerable to volatility.
Industry groups also expressed reservations over the new policy.
The National President of the Petroleum Products Retail Outlets Owners Association of Nigeria, Dr Billy Gillis-Harry, questioned whether marketers would now be expected to source dollars from the Central Bank of Nigeria to purchase petroleum products intended solely for domestic consumption.
Similarly, the National President of the Independent Petroleum Marketers Association of Nigeria, Shettima Maigandi, said the new arrangement would create additional financial strain for independent marketers, who naturally prefer transactions in naira since their customers pay in the local currency.
Stakeholders warned that while the shift reflects the commercial realities of a deregulated petroleum industry, it also places renewed focus on the future of the naira-for-crude policy, the resilience of Nigeria's foreign exchange market and the country's drive to deepen domestic energy value addition.
0 Comments
DISCLAIMER
The views and opinions expressed on this platform as comments were freely made by each person under his or her own volition or responsibility and were neither suggested nor dictated by the owners of News PLATFORM or any of their contracted staff. So we take no liability whatsoever for such comments.
Please take note!