In response to recent speculations surrounding the currency in which refined petroleum products from the Dangote Petroleum Refinery will be sold, oil marketers have sought to allay concerns by stating that the products will be dispensed in the local currency, the naira, and not in US dollars.
The clarification comes amidst the ongoing registration exercise for marketers by the refinery. On Tuesday, MOMAN, IPMAN, and DAPPMAN members were announced by Dangote Refinery as registered members for product distribution. These three major associations, collectively constituting 75 percent of the total market in Nigeria, are integral to the supply chain, facilitating fuel distribution to approximately 150,000 retail outlets across the country.
The $20 billion Dangote Refinery, which commenced the production of Automotive Gas Oil (diesel) and JetA1 (aviation fuel) on January 12, 2023, has, encountered various concerns that need addressing before it initiates the distribution of its products. One of the prominent concerns is the establishment of a pricing template for refined products.
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According to The Punch, officials of the Nigerian Midstream and Downstream Petroleum Regulatory Authority have been engaging in discussions with the refinery’s management to finalize the pricing structure for the products.
A significant aspect of the concerns relates to the use of the US dollar in the supply chain. Given that crude oil, the primary raw material for the refinery is an international commodity traded in dollars, questions arose regarding whether the refined products would also be sold in dollars, especially since the plant is located in a free trade zone.
Chief Ukadike Chinedu, the National Public Relations Officer of IPMAN, responded to these concerns, acknowledging that crude oil is indeed purchased in dollars but assuring that this would not dictate the currency for selling refined products in the Nigerian market.
“The legal tender in Nigeria is the naira. The cement being sold by Dangote Cement is done in naira, not in dollars. So why should one think that he will now sell fuel in dollars? Except for the offshore sales for those who want to move the refined products out of Nigeria using vessels to transport them to other countries. Such customers may get theirs in dollar equivalent,” Ukadike explained to The Punch.
The ongoing debate about the currency in which Dangote Refinery will transact its products gains significance against the backdrop of the escalating price of the dollar in Nigeria’s forex market. With crude oil supplied in dollars, some have assumed that the refinery would also adopt the dollar for its product sales.
To put a permanent end to this, Ukadike said that the Nigerian government needs to close up the widening gap in the foreign exchange rate.
“If the exchange rate for the dollar is low, petroleum products would have been cheap in Nigeria because the products are imported. So I believe that Dangote will definitely sell the products in our local currency, which is naira,” Ukadike asserted.
When asked whether marketers had been briefed on the currency for product sales, considering that crude oil is supplied in dollars, Ukadike clarified that the pricing template had not yet been finalized. He stated, “No, the pricing template has not come out. What is going on now is legislation. The template is not yet out. And I must state that there is no way the NNPC will bring out its template in naira and Dangote will bring out its own in dollars. It is not possible! So for the cost of their products, I think they are still trying to fix the prices with the regulatory agencies of the Federal Government.”
The Dangote Petroleum Refinery, with a colossal capacity to refine 650,000 barrels of crude oil per day, has been touted as a crucial solution to the rising cost of petroleum products resulting from the removal of fuel subsidies.
Since its inception, the refinery has received six million barrels of crude oil at its two Single Point Mooring (SPM) locations located 25km from the shore. The initial crude delivery took place on December 12, 2023, and the latest cargo was delivered on January 8, 2024.
In a statement issued by the President of Dangote Group, Aliko Dangote, he affirmed that the products would be available in the market within the month, pending regulatory approvals. Dangote said that the refinery will make a difference in the Nigerian petroleum sector.
“This is a game changer for our country, and I am very fulfilled with the actualization of this project,” he said.
As the registration process for marketers continues and discussions with regulatory authorities progress, the finalization of the pricing template will be a crucial step for Dangote Refinery in addressing concerns and ensuring a smooth transition into the distribution phase. Emphasis is on the commitment to transacting in the local currency, underlining the refinery’s alignment with established business practices within Nigeria.
The anticipation for the refinery’s contribution to stabilizing petroleum product prices remains high, awaiting the formal announcement of the pricing template and subsequent product availability in the market.