The commencement of the production of petrol by Dangote refinery has raised the hope of Nigerians on the prospect of an end to petrol scarcity, as currently being experienced by Nigerians, along with the hope of getting this product at a much lower prices, as was the case in the years past.
This has necessitated this attempt to answer some of the questions, some citizens may have in mind, for which answers are sought. So let’s attempt some Frequently Asked Questions and advance adequate answers.
WHY CAN’T DANGOTE SELL PETROL AT N250/BARREL, NOW THAT WE ARE NO MORE IMPORTING THE REFINED PRODUCT ANYMORE?
It’s not in Dangote’s capacity to sell it at N250/liter or any significantly lower prices than it is currently sold.
The Dangote refinery doesn’t get petrol for free from the Nigerian government. It buys crude oil at a certain price (even though not disclosed) which is closer to the prevalent price in the international market.
‘ Thankfully, the government has allowed Dangote refinery to pay for it in Naira, in which case they DON’T have to source for scarce foreign exchange’………….This has insulated the cost of purchasing crude from the fluctuating exchange rate of dollar/Naira and prevented the increasing demand pull of dollar from causing further devaluation of Naira. It is expected that the crude sale to Dangote will be done at a favorable price fixed by the federal government.
It is worthy to note that petrol in the international market is sold at an average pricek of $1.29/liter, which is about N2,000/liter.
So that gives us an idea of what the cost is in all the neighboring countries around Nigeria, so even at the N1,000/liter, there is still a subsidy of about N1,000 on a liter of petrol, which is what Nigerians see as a back door reintroduction of Subsidy payment. But in this instance, where NNPCL is the sole importer of petrol, the difference is recorded as UNDER RECOVERY or debt owed by the government to a limited liability company in which the government is a share holder. This debt is what the NNPCL reported to have crippled it from further importing petrol, leading to the product scarcity currently experienced in the country.
Now if after the cost reduction strategies, discounts being given to Dangote and cost reduction expected due to local supply of petrol, where the cost of shipping the procured petrol, the cost of contract procurement and execution, payment of legal fees, the bank charges on bank BG’s, Proof of Funds, LPO’s, petrol goods insurance premium and storage in tank farm charges etc, are saved from the cost of petrol before it gets to Nigeria, we get it at anything between N650 & N950, then Nigerians are very lucky indeed.
But there should be a tighter control on supplies to ensure that smuggling to neighboring countries is reduced to the barest minimum.
IF THE GOVERNMENT SELLS TO DANGOTE REFINERY IN NAIRA, THEN WHY SHOULD THE INTERNATIONAL BENCHMARK OF PRICE APPLY?
It should be remembered that the first policy statement of this government was to stop petrol subsidy payment. It means that the government will not sell petrol to Dangote at any subsidized price. Nigeria loses her benefits from petroleum resources to racketeering by trying to subsidize refined products to her citizens. It ends up in the neighboring countries as freebies for rogue marketers who smuggle it across the border to sell at international prizes, theen the citizens of our neighboring countries enjoy uninterrupted supplies of petrol at Nigerians expense, resulting in a massive loss of revenue to Nigeria that has over 250 millions mouths to feed. This then lead to massive fiscal problems at the macroeconomics level in Nigeria, because of lower revenue and high expenditures profile of the country like it was the case under the previous administrations when Nigeria’s debt to revenue ratio was 97% which necessitated that the government kept borrowing to finance the yearly budgets. It is due to the partial removal of the petrol subsidy that the debt to revenue profile of Nigeria now is reduced to 67%, which is a bit manageable by freeing up funds that should have been used in debt servicing and gives latitude for development.
WHY IS THE GOVERNMENT DESTROYING THE LOCAL AND MODULAR REFINERIES THAT COULD HAVE ASSISTED THE GOVERNMENT IN EASING THE SCARCITY OF PETROL INSTEAD OF ENCOURAGING THEM?
There is a difference between MODULAR refineries and ILLEGAL refineries. It is legal to own a duly registered modular refinery, but criminal to run an illegal refinery.
Nigeria currently has 25 licensed modular refineries. Five are operational and producing diesel, kerosene, black oil and naphtha. About ten such projects are under various stages of completion, while a handful of others have received licenses to establish.
These are not to be confused with illegal refineries, who are bunkering the nation’s crude oil pipelines to illegally refine the crude in a bid to produce adulterated petroleum products, especially, petrol, aviation fuel, kerosene and diesel.
They produce petrol that are lighter than pure petrol responsible for most of petrol explosions that have led to the loss of lives and properties experienced in the country.
The aviation fuel produced by them could lead to airplanes crash or explosion mid air.
The kerosene they sell in the open market for home use is an impure form of aviation fuel, in that it is much lighter than kerosene and are responsible for almost all the kerosene explosion happening in the country, in that it’s flashing point is lower than kerosene and so easily explodes when exposed to ignition.
These products are hazardous to the environment, the society and are also economic sabotage of our dwindling revenue.
If there owners are genuine about their investment, they should obtain modular refinery licenses and operate legally.
By Engr. Tope OgunsuaDANGOTE REFINERY AND PETROL AVAILABILITY/LOWER PRICES IN NIGERIA.
The commencement of the production of petrol by Dangote refinery has raised the hope of Nigerians on the prospect of an end to petrol scarcity, as currently being experienced by Nigerians, along with the hope of getting this product at a much lower prices, as was the case in the years past.
This has necessitated this attempt to answer some of the questions, some citizens may have in mind, for which answers are sought. So let’s attempt some Frequently Asked Questions and advance adequate answers.
WHY CAN’T DANGOTE SELL PETROL AT N250/BARREL, NOW THAT WE ARE NO MORE IMPORTING THE REFINED PRODUCT ANYMORE?
It’s not in Dangote’s capacity to sell it at N250/liter or any significantly lower prices than it is currently sold.
The Dangote refinery doesn’t get petrol for free from the Nigerian government. It buys crude oil at a certain price (even though not disclosed) which is closer to the prevalent price in the international market.
Thankfully, it has to pay for it in Naira, in which case they have to source for scarce foreign exchange, FX, at exorbitant rates because of the amount being sourced in dollars to buy Nigerian crude oil. This has insulated the cost of purchasing crude from the fluctuating exchange rate of dollar/Naira and prevented the increasing demand pull of dollar from causing further devaluation of Naira. It is expected that the crude sale to Dangote will be done at a favorable price fixed by the federal government.
It is worthy to note that petrol in the international market is sold at an average pricek of $1.29/liter, which is about N2,000/liter.
So that gives us an idea of what the cost is in all the neighboring countries around Nigeria, so even at the N1,000/liter, there is still a subsidy of about N1,000 on a liter of petrol, which is what Nigerians see as a back door reintroduction of Subsidy payment. But in this instance, where NNPCL is the sole importer of petrol, the difference is recorded as UNDER RECOVERY or debt owed by the government to a limited liability company in which the government is a share holder. This debt is what the NNPCL reported to have crippled it from further importing petrol, leading to the product scarcity currently experienced in the country.
Now if after the cost reduction strategies, discounts being given to Dangote and cost reduction expected due to local supply of petrol, where the cost of shipping the procured petrol, the cost of contract procurement and execution, payment of legal fees, the bank charges on bank BG’s, Proof of Funds, LPO’s, petrol goods insurance premium and storage in tank farm charges etc, are saved from the cost of petrol before it gets to Nigeria, we get it at anything between N650 & N950, then Nigerians are very lucky indeed.
But there should be a tighter control on supplies to ensure that smuggling to neighboring countries is reduced to the barest minimum.
IF THE GOVERNMENT SELLS TO DANGOTE REFINERY IN NAIRA, THEN WHY SHOULD THE INTERNATIONAL BENCHMARK OF PRICE APPLY?
It should be remembered that the first policy statement of this government was to stop petrol subsidy payment. It means that the government will not sell petrol to Dangote at any subsidized price. Nigeria loses her benefits from petroleum resources to racketeering by trying to subsidize refined products to her citizens. It ends up in the neighboring countries as freebies for rogue marketers who smuggle it across the border to sell at international prizes, theen the citizens of our neighboring countries enjoy uninterrupted supplies of petrol at Nigerians expense, resulting in a massive loss of revenue to Nigeria that has over 250 millions mouths to feed. This then lead to massive fiscal problems at the macroeconomics level in Nigeria, because of lower revenue and high expenditures profile of the country like it was the case under the previous administrations when Nigeria’s debt to revenue ratio was 97% which necessitated that the government kept borrowing to finance the yearly budgets. It is due to the partial removal of the petrol subsidy that the debt to revenue profile of Nigeria now is reduced to 67%, which is a bit manageable by freeing up funds that should have been used in debt servicing and gives latitude for development.
WHY IS THE GOVERNMENT DESTROYING THE LOCAL AND MODULAR REFINERIES THAT COULD HAVE ASSISTED THE GOVERNMENT IN EASING THE SCARCITY OF PETROL INSTEAD OF ENCOURAGING THEM?
There is a difference between MODULAR refineries and ILLEGAL refineries. It is legal to own a duly registered modular refinery, but criminal to run an illegal refinery.
Nigeria currently has 25 licensed modular refineries. Five are operational and producing diesel, kerosene, black oil and naphtha. About ten such projects are under various stages of completion, while a handful of others have received licenses to establish.
These are not to be confused with illegal refineries, who are bunkering the nation’s crude oil pipelines to illegally refine the crude in a bid to produce adulterated petroleum products, especially, petrol, aviation fuel, kerosene and diesel.
They produce petrol that are lighter than pure petrol responsible for most of petrol explosions that have led to the loss of lives and properties experienced in the country.
The aviation fuel produced by them could lead to airplanes crash or explosion mid air.
The kerosene they sell in the open market for home use is an impure form of aviation fuel, in that it is much lighter than kerosene and are responsible for almost all the kerosene explosion happening in the country, in that it’s flashing point is lower than kerosene and so easily explodes when exposed to ignition.
These products are hazardous to the environment, the society and are also economic sabotage of our dwindling revenue.
If there owners are genuine about their investment, they should obtain modular refinery licenses and operate legally.
By Engr. Tope Ogunsua
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