Dangote resumes sale of fuel in dollars

Dangote Petroleum Refinery has introduced a new dollar-denominated pricing framework for the sale of Premium Motor Spirit (PMS), popularly known as petrol, in a move expected to significantly influence Nigeria’s downstream petroleum market and reshape the pricing structure for refined petroleum products.

The new pricing template, which took effect on Monday, also covers Automotive Gas Oil (diesel) and aviation fuel, signalling the refinery’s transition from naira-based transactions to a dollar-denominated commercial model for most of its refined products.

The development marks another major milestone in the operations of Africa’s largest single-train refinery and comes amid ongoing reforms in Nigeria’s oil and gas sector aimed at expanding domestic refining capacity and reducing dependence on imported petroleum products.

Pricing template

Under the revised pricing schedule, the refinery fixed the ex-depot price of petrol at $0.779 per litre, while diesel will sell at $1.087 per litre. Aviation fuel has been priced at $0.942 per litre, while coastal deliveries of petrol have been pegged at $1,044.62 per metric tonne.

The refinery informed petroleum marketers and customers that the prices became effective immediately, replacing the previous naira-denominated pricing structure.

It also announced that all previously issued Proforma Invoices and Deal Recaps based on naira transactions for gantry and coastal supplies had become invalid following the transition.

Customers were advised not to make payments using the old invoices as all qualifying transactions would now be processed under the new dollar-based pricing system.

However, the company clarified that the new pricing arrangement does not apply to Liquefied Petroleum Gas (LPG), which will continue to operate under the existing payment structure.

Reason for transition

Industry stakeholders say the move reflects changes in the refinery’s crude oil procurement strategy.

According to market sources, Dangote Refinery now receives a larger proportion of its crude oil supplies through dollar-denominated transactions, making it increasingly difficult to maintain a system where refined products are largely sold in naira.

The mismatch between the currency used to purchase crude oil and the currency received from product sales reportedly exposed the refinery to significant foreign exchange risks.

The volatility of the naira and fluctuations in international crude oil prices further increased pressure on the refinery’s commercial operations, making a transition to dollar pricing a more sustainable option.

The new framework is therefore expected to align the refinery’s revenue with its procurement costs while reducing exposure to exchange rate fluctuations.

Implications for marketers

The pricing adjustment is expected to have direct implications for petroleum marketers who source products from the refinery for distribution across the country.

Marketers purchasing petrol, diesel and aviation fuel from Dangote Refinery will now have to consider prevailing foreign exchange rates when calculating their overall costs.

Industry experts say the final retail pump price of petrol will continue to depend on several factors, including the naira-to-dollar exchange rate, transportation costs, logistics expenses, storage charges, regulatory fees and marketers’ operating margins.

As a result, pump prices may continue to fluctuate in response to movements in both the foreign exchange market and global crude oil prices.

Market observers also expect marketers to closely monitor the implementation of the new pricing model before making long-term supply decisions.

Impact on downstream sector

The introduction of dollar-denominated pricing further highlights the changing dynamics within Nigeria’s deregulated downstream petroleum sector.

Since commencing commercial operations, Dangote Refinery has become one of the country’s largest suppliers of refined petroleum products, giving its pricing decisions considerable influence on the domestic fuel market.

The latest development could prompt broader adjustments across the industry as other suppliers review their own pricing strategies.

The transition has also renewed discussions about the future of the Federal Government’s naira-for-crude initiative, which was introduced to encourage local refining, conserve foreign exchange and stabilise domestic fuel prices.

Although the policy contributed to the early adoption of naira-based transactions, implementation challenges and changes in crude supply arrangements have continued to affect its effectiveness.

As Nigeria pursues greater energy security through increased domestic refining, stakeholders will be watching closely to see how Dangote Refinery’s new pricing framework influences fuel availability, competition and the overall cost of petroleum products in the country.