Why Local Petrol from NNPC Costs More than Imported Fuel: IPMAN Critiques Pricing Strategies

• September 17, 2024
• Ethan Carrington
• 0 Comments

Oil Marketers Question NNPC's Petrol Pricing Strategy

The Independent Petroleum Marketers Association of Nigeria (IPMAN) has voiced strong concerns over the Nigerian National Petroleum Company Limited's (NNPC) recent pricing strategy for petrol produced locally at the Dangote Refinery. According to IPMAN, led by its National Welfare Officer, John Kekeocha, it is perplexing and counterintuitive for petrol sourced within the country to cost more than imported fuel. This issue has sparked intense debate and public discontent, causing many to question the benefits that local production is supposed to offer.

The Crux of the Controversy

The controversy erupted following NNPC's announcement that it started loading the first batch of petrol from the Dangote Refinery, labeling this as a significant achievement for Nigeria's petroleum industry. However, the joy was short-lived as it became evident that the petrol, despite being domestically sourced, was priced higher than its imported counterparts. John Kekeocha argued on Channels Television that the rationale behind promoting local production loses its merit if it fails to bring about cost savings. He highlighted that consumers expected lower prices with local production, which should eliminate various costs associated with international logistics, such as shipping and import duties.

Dissecting the Pricing Elements

The Nigerian National Petroleum Company Limited (NNPC) announced that it procured petrol from the Dangote Refinery at a rate of N898 per litre. However, estimated retail prices revealed by NNPC ranged from N950.22 per litre in Lagos to an astonishing N1,019 per litre in Borno. These prices were based on a comprehensive pricing template that included various additional fees such as distribution, inspection, and contributions to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). According to NNPC, these added costs justify the higher retail prices.

One key point in this debate is that the NNPC paid for this batch of petrol in USD for the September 2024 offtake. The company has mentioned that transactions in Naira will commence from October 1, 2024, which it believes will provide more transparency and ease of understanding for the general public. Moreover, NNPC has assured that any disputed pricing will result in discounts that will be passed on to consumers, aiming to alleviate public concern to some extent.

Refinery's Stance: Misleading and Mischievous Claims

Contrary to NNPC's claims, the Dangote Refinery has rejected the notion that it sold petrol to NNPC at N898 per litre, calling such allegations 'misleading and mischievous.' Anthony Chiejina, a spokesman for the refinery, clarified that the transactions were made in dollars and the cost savings compared to importing the petrol were significant. Chiejina urged the public and stakeholders to consider the economic benefits of having a local refinery, which should theoretically lower the dependency on imports and stabilize the supply chain despite initial pricing hiccups.

Despite the refinery's defense, the general sentiment among consumers and various stakeholders like IPMAN remains that local petrol should inherently be cheaper. John Kekeocha reiterated that avoiding international shipping logistics alone should offer substantial cost reductions that should be reflected in retail prices. He argued that it is illogical to celebrate the milestone of local production when consumers see little to no financial benefits.

Future Implications for Nigeria's Petroleum Industry

This ongoing debate brings several critical issues into the limelight, such as the transparency of pricing strategies and the broader economic benefits of local production. The conflicting narratives from NNPC and the Dangote Refinery highlight the need for a unified and transparent pricing mechanism that consumers can trust. Additionally, Kekeocha's concerns reflect a widespread sentiment among Nigerians who are eager to see the economic benefits of local manufacturing and production being realized.

It is also essential for NNPC to communicate more clearly with Nigerians about the breakdown of costs involved in the pricing of petrol. Effective communication may bridge the gap between public expectation and corporate realities. For instance, NNPC may need to provide detailed justifications for the added costs and what measures are being taken to ensure that prices will drop once Naira transactions commence.

In conclusion, the tension surrounding the pricing of locally produced petrol underscores a broader challenge Nigeria's petroleum industry faces. For local refineries like Dangote's to gain public endorsement, the economic benefits must be palpable to the average Nigerian consumer. Until then, skepticism and controversy will likely continue to cloud what should be a significant milestone in Nigeria's quest for energy independence.

The coming months will be crucial in determining how this situation unfolds and whether initiatives such as John Kekeocha's criticisms will catalyze policy changes that align local production advantages with consumer expectations. For now, all eyes remain on the NNPC and how it navigates these muddy waters.