Dangote Refinery Defends Price Hikes as Inventory Lags

Petrol is selling between about ₦1,310 and ₦1,400 a litre across Nigeria after Dangote Petroleum Refinery raised its gantry price for the third time in eight days, a move the company has tied to the cost of crude already in its tanks rather than to Friday’s weaker international benchmarks.

The refinery lifted the depot price by ₦65 on 29 August, from ₦1,200 to ₦1,265 a litre. That followed increases from ₦1,165 to ₦1,185 on 21 August and to ₦1,200 on 26 August. Taken together, the three steps add ₦100 a litre, or about 8.6 percent, in eight days. The coastal price per metric tonne also rose, from ₦1,582,380 to ₦1,669,545. Customers were told to return existing authorisations to collect so that new volume contracts could be issued before loading resumed.

A senior Dangote executive, speaking to The Punch on condition of anonymity, said a day’s quoted crude price cannot set the cost of petrol made from cargoes bought weeks earlier. Completing a purchase, securing a loading window, chartering a ship and waiting for the crude to arrive, he argued, takes time, and large volumes bought when prices were higher still sit in storage. Selling today’s product against a cheaper replacement barrel would, in that view, ignore inventory already paid for. Reuters has reported that 30 to 40 percent of the refinery’s feedstock is imported rather than drawn solely from Nigerian crude.

At the pump the increase is already visible. Petrol is around ₦1,310 a litre in Lagos and Ogun and ₦1,350 or more in many northern and inland markets, with some stations approaching ₦1,400. Distance from the coastal plant and haulage costs account for much of the spread. Dangote has said it intends to extend a free distribution scheme nationwide to narrow that gap.

Marketers’ data complicate the picture. The Major Energies Marketers Association of Nigeria’s 27 August bulletin put Dangote’s then gantry price of ₦1,200 a litre about ₦22 below a spot import-parity estimate of ₦1,222.32. Two days later the new ₦1,265 rate sat ₦42.68 above that same August 27 parity figure. Whether import parity has since moved has not been confirmed.

Brent crude closed near $88 a barrel on Friday, down about 5 percent, with West Texas Intermediate around $83. Chinedu Ukadike, national publicity secretary of the Independent Petroleum Marketers Association of Nigeria, said volatility, government policy and the exchange rate make planning difficult. He acknowledged that Dangote had cut prices when international markets eased earlier, but said the present swings leave independent marketers unable to structure their businesses with any confidence. He also warned that continued tension between the United States and Iran could keep prices irregular.

For motorists and businesses already living with high transport costs, the latest adjustment continues a pattern in which domestic pump prices move in steps that do not always match the daily crude tape. The refinery’s defence is lag and inventory. Marketers’ complaint is that those steps arrive faster than they can plan around them.