"We Have to Abide": Dangote’s Petrol Price Reduction Causes Headache for Marketers
- The Dangote fuel Refinery's move to reduce the ex-depot price of gasoline caused large losses for numerous fuel merchants
- Dangote refinery’s sudden price slash might be because of worries that some dealers might start importing cheaper fuel
- Some marketers would have to offer the product below its cost if they had purchased it just hours before the announcement
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Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
Many petroleum marketers suffered significant losses as a result of the Dangote Petroleum Refinery's decision to lower the ex-depot price of Premium Motor Spirit (petrol) on Saturday night.
Source: Getty Images
According to marketers, the Dangote refinery's abrupt price cut may have been prompted by recent concerns that some dealers would turn to importation if the foreign PMS continued to be less expensive than the ex-depot rates of locally refined goods.
The Punch reported that some marketers who bought the product a few hours before the announcement would be forced to sell below the cost, incurring debts running into millions of naira.
In an interview with the Vice President of the Independent Petroleum Marketers Association of Nigeria, Hammed Fashola, said the price reduction is a good development but it will surely affect business in negative and positive ways.
Speaking about the negative effect of the reduction, Fashola said, '
“For instance, maybe a marketer purchased some product on Friday. I am sure the marketer would not have sold it before the new reduction happened. That is the negative aspect of it. But, we have to abide by it. We have to live with it. That is the beauty of deregulation.
“So, we have to be careful when we purchase our product. Where we purchase it from and the price we are getting it. And we must have adequate information on what is going on. So that we will not be losing money every day,” Fashola noted.
Marketers left with no choice
Fashola emphasised that when a price reduction happens, the only option a marketer has is to reduce the price so as to let go of old stocks, or else he would be left with no buyers.
“When this happens, the only option a marketer has is to bring down the price. Because if you don’t do that, the competition will set in.
“Some marketers in your neighbourhood might be lucky to get their product tomorrow at N890. So, if you have a N950 product with you, within two to three days, you will not have an option but to bring it down. That is the situation marketers are facing now, but we have to cope with it. It is the marketer who bears the losses,” he stated.
Asked if there is a way to carry all stakeholders along before a major price review to reduce losses, the IPMAN leader replied,
“There is no way one can do that in this competitive environment that we find ourselves in now. It is a competition.”
He recalled that some importers have recently threatened to boycott locally refined petroleum products because the imported ones were cheaper, saying Dangote refinery has reacted to that.
“Some marketers and importers were threatening that an imported PMS is much cheaper than a Dangote PMS. So, Dangote is reacting to this with the price reduction. That is the beauty of competition. There is nothing anybody can do about that. You want to sell and I want to sell. I think it is good for the sector.
“It is the public that will gain more because, by this, they will be getting cheaper fuel, which is good. That is what we have been pushing for. It has come. We don’t have to complain,” Fashola maintained.
Asked to speak more on Dangote reacting to the threat to import cheaper fuel, he said, “Of course, Dangote has to react to it. If it doesn’t react this way, if the imported one is cheaper, what will happen? Look at the investment there.
“I am happy it is happening this way. We believe that how can imported PMS be cheaper than Dangote’s PMS that is refined here locally? We know crude is being purchased here in naira, not in dollars; though we know that it is going to be in the official exchange rate, but we won’t be looking for dollars. The issue of transportation will not be there and some other charges too.
“I think we are getting there. We are facing reality. Everybody is facing reality, both big and small. We are all feeling it. It is good for the system,” he added.
NNPC may follow suit
On whether the Nigerian National Petroleum Company Limited would bring down its price too, he replied in the affirmative.
“They have to. If they want to remain in business, they have to. It is a reaction and it will go through the chain of supply. If NNPC says they don’t want to reduce their price, who will go there to buy? They have to reduce it.
“It is the same thing happening to the retailers, the marketers, and the filling stations. The same will happen to them. They have to react to the new market realities. Everybody will react to the new development,” he stressed.
FG plans new 150 retail stations
Legit.ng reported that Michael Oluwagbemi, the programme director and chief executive of the Presidential Compressed Natural Gas Stations Initiative has announced plans to have no fewer than 150 retail stations before the end of 2025.
He disclosed this during the groundbreaking ceremony of five mini-liquefied natural gas plants in Kogi by the Nigerian National Petroleum Company Limited.
He added that the presidential CNG initiative is hoping to attract millions of dollars in investment this year.
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Source: Legit.ng
