Dangote's First Petrol Exposes the Price Nigeria Has Not Yet Agreed On
On 15 September 2024 trucks belonging to the Nigerian National Petroleum Company began loading petrol at the Dangote refinery in Ibeju-Lekki, Lagos. It was a moment Nigeria had waited decades for: domestically refined gasoline from a 650,000 barrel-a-day plant, in a country that has exported crude and imported almost all of its fuel for most of its history. Within hours the occasion turned into a public argument about price. NNPC's spokesman, Olufemi Soneye, said the company had bought the first cargo at N898 per litre.
Dangote said that figure was misleading, that its current crude stock had been bought in dollars, and that Nigerians should await the formal pricing framework from the technical sub-committee on naira-based crude sales to local refineries, due to start on 1 October 2024. A refiner sells at a price that reflects the value of its crude and the margin it can earn, and that value is set internationally. The Nation reported that NNPC's template showed petrol could be bought at N842.61 per litre on an import-parity basis using Platts benchmarks, against the N898 paid to Dangote.
Reports also cited a payment of around USD 120 million for 25 million litres, with only about 16.8 million litres released in the first loading. The government's answer is the naira-for-crude arrangement, under which Nigerian crude is sold to local refiners in naira and refined products are bought back in naira. The intention is to remove foreign exchange pressure from the fuel market and to let local refining insulate consumers from naira weakness. If crude is sold to Dangote in naira at an exchange rate below the market rate, the refiner is receiving an implicit subsidy, which should then be passed through in lower petrol prices.
A refinery of this size needs a steady flow of crude, and Nigeria's own output has for years been held back by pipeline theft, vandalism and underinvestment. The Petroleum Industry Act was intended to create a deregulated downstream market. The Dangote refinery is a major industrial achievement and should, over time, improve Nigeria's fuel security and its balance of payments.