Dangote Petroleum Refinery & Petrochemicals has reaffirmed its commitment to serving as a stabilizing force for Nigeria’s economy. With geopolitical tensions in the Middle East triggering refinery shutdowns and production cuts worldwide, a global scarcity of petroleum products has become an imminent threat, reports ITREALMS.
Major exporters like China have already moved to protect their interests by banning the export of gasoline and diesel, leaving nations reliant on imports in a vulnerable position.
In this climate, the Dangote Refinery is prioritizing the domestic market to ensure Nigeria remains insulated from these external supply shocks, demonstrating the strategic necessity of sovereign refining capacity.
The escalating conflict has driven global crude and freight prices sharply higher, with the Brent benchmark surging by approximately 26% to over $84.00 per barrel in a remarkably short window. In response to these rising costs, the refinery implemented a measured adjustment of ₦100 per litre in its ex-depot price for Premium Motor Spirit, which represents an increase of only about 12%.
To cushion the impact on the Nigerian consumer, the refinery has opted to absorb 20% of the cost escalation for the time being. This significant corporate sacrifice is being made even as the refinery continues to source crude at prevailing international market rates, regardless of whether the supplier is local or foreign.
The economics of landing crude in Nigeria present a unique set of challenges. Nigerian crude oil is typically priced between $3 and $6 above the Brent benchmark. When adding freight costs of approximately $3.50 per barrel, the crude currently lands in refinery tanks at a total cost between $88 and $91 per barrel. For historical context, crude was landing at approximately $68 per barrel when the ex-depot price was maintained at ₦774 per litre.
The economics of landing crude in Nigeria present a unique set of challenges. Nigerian crude oil is typically priced between $3 and $6 above the Brent benchmark. When adding freight costs of approximately $3.50 per barrel, the crude currently lands in refinery tanks at a total cost between $88 and $91 per barrel. For historical context, crude was landing at approximately $68 per barrel when the ex-depot price was maintained at ₦774 per litre.
While the refinery receives approximately five cargoes monthly from the NNPC paid for in Naira, these are priced at international market rates plus a premium. This volume falls significantly short of the 13 monthly cargoes required to fully support the Nigerian market, forcing the refinery to procure the balance from international traders at open market exchange rates.
The high cost of crude is further compounded by the failure of some Nigerian upstream producers to supply crude oil to the refinery as mandated under the Petroleum Industry Act. This has forced the facility to source a substantial portion of its feedstock through international traders who charge additional premiums.
The high cost of crude is further compounded by the failure of some Nigerian upstream producers to supply crude oil to the refinery as mandated under the Petroleum Industry Act. This has forced the facility to source a substantial portion of its feedstock through international traders who charge additional premiums.
As a private enterprise operating in a deregulated environment, the Dangote Refinery must align its pricing with market realities to ensure operational sustainability. Selling below cost would eventually undermine the refinery's ability to procure crude and guarantee an uninterrupted fuel supply to the nation.
Despite these immense pressures, local refining at this scale continues to provide a vital buffer for the country. It reduces exposure to international supply disruptions, moderates foreign exchange demand, and protects the nation from the severe shortages often experienced during periods of global instability. To further mitigate the impact of global shocks and improve distribution efficiency, the refinery is accelerating the deployment of Compressed Natural Gas-powered trucks.
Despite these immense pressures, local refining at this scale continues to provide a vital buffer for the country. It reduces exposure to international supply disruptions, moderates foreign exchange demand, and protects the nation from the severe shortages often experienced during periods of global instability. To further mitigate the impact of global shocks and improve distribution efficiency, the refinery is accelerating the deployment of Compressed Natural Gas-powered trucks.
This rollout, scheduled to commence this month, is designed to reduce logistics costs and improve delivery timelines across the downstream sector. Ultimately, the refinery remains anchored in its objective of securing long-term energy security and stability for Nigeria at the most affordable cost possible under current market conditions.
Remmy Nweke/DoP
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