Nigerians may face more economic hardship as fuel price is likely to rise again following the decision by the Nigerian National Petroleum Company Limited (NNPCL) to end its exclusive offtake agreement with the Dangote Refinery, allowing other marketers to buy the product directly from the company.
The current fuel cost was changed in August when the NNPCL adjusted the pump price from N568 to N855 per litre in Lagos, and to almost N900 in other parts of the country.
The NNPCL’s abrupt exit as a middleman in the Dangote Refinery means that the national oil company will no longer cover the price gap between the facility’s price and the selling price to retailers, previously absorbing a subsidy of N133 per litre.
Meanwhile, President Bola Tinubu’s administration plans to deliver up to 400,000 barrels of Nigerian crude oil daily to the Dangote Refinery under its naira-for-crude agreement, facilitating more efficient operations at the facility.
Under the new arrangement, independent marketers can negotiate petrol prices directly with the Dangote Refinery through a “willing buyer, willing seller” model.
This approach however, underscores the practices already in place for other deregulated products such as diesel and kerosene.
Recall that Devakumar Edwin, Vice President of Dangote Industries, previously confirmed that the refinery, which has a capacity of 650,000 barrels per day, had started processing petrol with the NNPCL as its initial sole off-taker. However, as of now, independent marketers are empowered to engage with Dangote directly, marking a new era for fuel distribution in Nigeria.
Moreover, an NNPCL official speaking to Premium Times expressed the pressures created by the subsidy system, stating, “We can no longer continue to bear that burden.”
Experts warn that rising tensions in the Middle East could further exacerbate the situation, potentially leading to an increase in petrol prices throughout Nigeria and globally.
Recent market fluctuations have seen oil prices extend their gains, with Brent crude nearing $80 per barrel, reflecting concerns over widespread conflict in the Middle East that could disrupt oil exports from key producers. Yesterday, Brent rose by $1.09 (1.4 percent) to settle at $79.14, while West Texas Intermediate (WTI) climbed $1.15 (1.55 percent) to $75.53.
The unrest in the Middle East comes in the wake of Iran’s missile attack on Israel, which provoked fears of retaliatory strikes and a possible full-scale war that could lead to significant supply shortages in the oil market. Analysts caution that should the situation deteriorate, oil prices could soar to triple digits, reminiscent of pre-shale revolution peaks.