₦airaland Forum

Like many other users in this platform, I was surprised by the news of NNPC increasing fuel price again to over N1000 per litre even after promising a downward review of it's pricing template as a result of the new deal with Dangote refinery.

Reading several publications on the issues which includes

1. Naira for crude oil deal between Dangote and NNPCL with Dangote pushing for an exclusivity status (Monopoly) in the provision of petroleum products within the Nigerian market.

2. Oil marketers (IPMAN) agitation for a full implementation of the deregulation policy within the petroleum market to grant them direct access to buy from Dangote and sell at whatever price they want (Maximize Profit).

3. Nigerians bearing the burden of a harsh economy due to greedy market forces (Dangote and NNPC's greed) as a result of the astronomical increases in the price of fuel, diesel and other petroleum products.


In this post, I will try to profer a workable solution to the crisis that will benefit everyone especially the interest of Nigerians.

When Dangote launched his refinery last year, many Nigerians were excited over the prospects and advantages that refining locally will bring. Many Nigerians were happy because apart from jobs the refinery will create, it was believed that it will crash the price of fuel and also strengthen the naira. For me, I unfortunately did not share in this sentiment. This is because based on the monopolistic tendencies of Dangote and how he operated in the cement market I knew that the dream of his refinery offering a cheaper fuel price was a mirage. As long as Dangote refinery remains the only big player in the Nigerian oil refining market and government does not intervene, fuel price may continue to increase because Dangote will milk his refinery's monopolistic status for all it's worth. It will not be surprising that before December this year fuel price will be over N1500 per litre.

Dangote Refinery's monopolistic status need to be erased, this can only be achieved when other big players like the PH over 200,000 bpd and warri over 120,000-bpd refineries are operational to compete with Dangote refinery. This is the only way that can guarantee a stable, competitive and affordable pricing of petroleum products within Nigeria.

Short Term Solution
Based on the points I made earlier, allowing "market forces" to dictate fuel price in a monopoly (Dangote Refinery) is a receipe for disaster as it means that fuel price can increase to N5000 per litre at anytime. When NNPC announced the new fuel price yesterday, one reason it gave that surpriced me was that the increase was inevitable because it bought the comodity at N898 per litre from Dangote refinery. I am still surprised because it is silly for Dangote to sale at N898 per litre for a locally refined fuel. If truly this is what NNPC bought it, can Dangote make public the report on how much it costs his refinery to produce a litre of fuel? It is obvious we won't be seeing such reports anytime soon....

Fuel is central to Nigeria's economy, apart from transportation, small businesses rely on fuel to power generators and other productive activities. If the government decides to allow the shady pricing template between Dangote and NNPC to continue in the name of market forces without providing any form of subsidy then Nigeria's economy will get worse as this volatility in pricing will lead to unpredictable devastation..... To safeguard against this and stabilize petrol price, the government need to as a matter of urgency setup a temporary arrangement where NNPCL returns as the sole buyer from Dangote refinery with subsidy program put in place to mitigate against "Dangote's premium pricing".... This temporary arrangement should end when PH refinery (rumored to begin full operation in December) comes on board....

Long Term Solution
Nigerians need to pressurize the national assembly as a matter of urgency to get Tinubu and NNPCL to fast track the operational start dates of the national refineries. Personally, I will prefer that these refineries are sold today to serious private local businesses that are hungry to invest in the petroleum sector as NNPC management has proven severally to be highly corrupt and incompetent in maintaining these refineries. Let the national assembly push for the sale of these refineries in a transparent way to neutral third parties (Not a sale to Dangote proxies) in a PPP arrangement.... Also a bill needs to be passed by the national assembly that will build on the current naira for crude arrangement, this bill when passed into law will mandate NNPCL and other oil producing companies to prioritize servicing local market and ensure adequate supply of crude oil in naira to local refineries operating within the country....

Once these refineries and other smaller refineries are fully operational and supported, if the government through it's petroleum ministry can implement a regulatory framework that will ensure a healthy competitive free oil refining market, the government will not only solve the issue of fuel scarcity but will save huge on forex and Nigerians will experience drastic drop in the prices of fuel, diesel, kerosene and other petroleum products within a short period of time....

The solution is simple, let Dangote and the other oil marketers be doing their business, and let the consumers decide which one to patronize based on the price.

If everybody is doing the same thing and only one person is doing the same thing, the same thing, and only one person is doing the same thing, then that person is the one you should be asking questions about.

Simple logic.

That is not the solution because Dangote has the upper hand due to the fact that he is refining locally while marketers are importing the product.... Dangote will still control fuel price and overtime put the marketers importing the product out of business....

tundegan:
The solution is simple, let Dangote and the other oil marketers be doing their business, and let the consumers decide which one to patronize based on the price.

If everybody is doing the same thing and only one person is doing the same thing, the same thing, and only one person is doing the same thing, then that person is the one you should be asking questions about.

Simple logic.

The solution is for more refineries to come on board.

Yes that's the long term solution....

Anither563:
The solution is for more refineries to come on board.

Your second paragraph does not make sense....

tundegan:
The solution is simple, let Dangote and the other oil marketers be doing their business, and let the consumers decide which one to patronize based on the price.

If everybody is doing the same thing and only one person is doing the same thing, the same thing, and only one person is doing the same thing, then that person is the one you should be asking questions about.

Simple logic.

Toh

Something must be done about the fuel price and the way the marketers are playing with our intelligence. The government should come up with a regulatory framework that will ensure a healthy competitive free oil refining market.

We need to save the situation before it gets worse