Price war intensifies in Nigeria’s oil market

DDM News

The competition in Nigeria’s downstream oil sector intensified on Tuesday as major marketers lowered prices to compete with Dangote Refinery.

Diaspora digital media (DDM) gathered that marketers adjusted prices to undercut Dangote Petroleum Refinery’s gantry loading rate of N825 per litre, attracting more buyers to imported fuel sources.

This shift followed a significant reduction in the landing cost of imported Premium Motor Spirit (PMS) to N774.72 per litre.

The decrease in landing cost is expected to influence pump prices, potentially bringing fuel costs down to about N800 per litre.

Industry experts confirmed that the N774.72 per litre landing cost includes shipping fees, import duties, and exchange rate fluctuations.

This figure represents a notable reduction of N50.28 compared to Dangote Refinery’s ex-depot price, fueling competition in the market.

As a result, retail marketers have increasingly favored imported products over refinery supplies due to the more competitive pricing structure.

Findings from The PUNCH indicate that this reduction may encourage independent marketers to re-enter the fuel importation business.

Crude oil prices play a crucial role in fuel pricing, and their fluctuations significantly impact the cost of petrol.

The National Publicity Secretary of the Independent Marketers Association of Nigeria, Chief Ukadike Chinedu, stated that crude oil prices affect petrol prices.

A further drop in crude oil prices could push petrol prices even lower, potentially reaching as low as N800 per litre.

Last Monday, the Nigerian National Petroleum Company (NNPC) reduced its retail fuel price in Lagos and Abuja.

The new NNPC fuel price is now N860 and N880 per litre, down from N945 and N965 per litre.

This reduction followed Dangote Refinery’s second price cut of the year and its third adjustment within two months.

Dangote Refinery lowered its ex-depot price from N890 to N825 per litre, making fuel more affordable for Nigerians.

NNPC’s price adjustment sparked intense competition among private marketers aiming to attract more customers in a price-sensitive market.

Nigerian consumers closely monitor fuel price fluctuations, leading to increased demand for the most affordable supply sources.

The ongoing reduction in petrol prices has placed financial strain on fuel importers and local suppliers alike.

Petrol importers currently face daily losses of around N2.5 billion and monthly losses of approximately N75 billion.

In response, fuel importers have secured new shipments at lower costs to remain competitive in the changing market landscape.

Market analysts suggest that cheaper fuel imports pose a significant challenge to Dangote Refinery’s operations and pricing strategy.

Data from the Major Energies Marketers Association of Nigeria revealed a substantial decline in fuel import parity costs.

The estimated import parity cost into storage tanks has now fallen to N774.82 per litre, down by 16.5% from N927.48.

The 30-day average cost of petrol has also dropped to N864.92 per litre, reflecting market adjustments.

On-the-spot sales at the Nigerian Pipeline and Storage Company (NPSC) terminal stood at N927.53 per litre.

Brent crude oil prices also declined from $76.48 per barrel to $70.36 per barrel, affecting global fuel prices.

The exchange rate for fuel import calculations was pegged at N1,517.24 per dollar, further impacting costs.

Marketers based their pricing calculations on a shipment of 38,000 metric tonnes, adjusting for market fluctuations.

The recent cost reductions have improved conditions for importers, leading many private depot owners to adjust their pricing.

Private depot owners and independent marketers now see an opportunity to offer competitive prices against Dangote Refinery’s rates.

Further investigations revealed that private depots have adjusted their pricing to attract more marketers.

Depot operators such as AA RANO, MENJ, and MRS TINCAN reduced their loading prices to N830 per litre.

Other depots, including WOSBAB and AITEO, set their prices at N832 per litre to stay competitive.

RAINOIL depot offered its fuel at N831 per litre, providing an alternative for marketers.

Marketers who purchased two million litres from Dangote Refinery at N825 per litre resold at N835 per litre.

This resale price generated only a N1 profit per litre, making Dangote’s supply less attractive.

In contrast, private depots offered prices N4 lower than the refinery’s, drawing in more buyers.

Oil and gas expert Olatide Jeremiah predicts that Dangote Refinery may soon lower its prices further.

Jeremiah is the Chief Executive Officer of petroleumprice.ng and closely monitors fuel market trends.

He noted that frequent fuel price fluctuations have caused marketers to prefer private depots over Dangote Refinery.

Private depots provide greater price stability, making them a more attractive supply source for fuel marketers.

Dangote Refinery has already made two price reductions this year, but competition continues to intensify.

Jeremiah explained that petrol and diesel prices started dropping significantly last week.

By Thursday, fuel prices had fallen below Dangote’s ex-depot rate, shifting market dynamics.

Dangote’s ex-depot price remains N825 per litre, but marketers pay an additional N9 in levies.

These additional costs bring the total price per litre from Dangote Refinery to N834.

Some marketers holding older stock from Dangote Refinery are struggling to sell at cost price.

Private depots now sell petrol at N830 per litre, making them the preferred choice for marketers.

The cost of transporting fuel from Dangote Refinery to retail stations ranges from N40 to N45 per litre.

This high transportation cost makes private depot purchases more appealing to marketers.

As a result, many marketers have shifted away from Dangote’s depot to private suppliers.

Dangote Refinery’s depot has seen reduced activity due to these market shifts.

If the trend continues, Dangote may be forced to lower its prices further.

Rumors are already circulating about a possible refinery price cut in response to competition.

Private depots are now experiencing increased sales as marketers prioritize lower prices.

The constant fluctuation in fuel prices has caused uncertainty among petroleum marketers.

Members of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN) raised concerns about these frequent price changes.

Despite Nigeria’s deregulated oil market, PETROAN believes that pricing instability negatively affects businesses.

PETROAN has proposed a policy requiring price adjustments only every six months.

This policy would help create a more predictable fuel market for businesses and consumers.

Marketers continue to assess fuel supply options, favoring private depots due to their stable pricing.

The battle for market dominance remains fierce, with further price reductions likely in the coming weeks.

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