Fuel Cost to Crash as Importers Begin Negotiating Reduction Amid Dangote, NNPC Price War
- In an effort to balance their mounting losses, importers are searching for alternative markets and battling for survival
- This is because of the intense competition between Dangote Refinery and NNPC Retail Ltd., which drives down the price of petrol
- The market turbulence has taken marketers by surprise, and they are now facing significant and unforeseen losses
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Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
Importers are fighting to stay afloat and looking for alternative markets to offset growing losses as NNPC Retail Ltd. and Dangote Refinery engage in fierce competition that pushes down petrol prices.
Source: Getty Images
As the operating space becomes more erratic, companies are reconsidering their methods to maintain operations in the face of declining margins and unstable global dynamics, according to information obtained by Daily Sun.
Marketers have been caught off guard by the market turmoil and are dealing with big and unexpected losses, according to sources, particularly those who have large stocks in their tank farms and impending gasoline cargoes.
Effect of price slash
Dangote Refinery and NNPC Retail Limited cut the price of gasoline at the pump from over N900 per litre to N860 per litre during the penultimate week.
Industry participants are fighting to survive as they deal with the financial burden of the price decrease after the reduction sent shockwaves through the market.
Mr. Billy Gilly-Harry, President of the Petroleum Products Retail Outlets Association of Nigeria (PETROAN), commented on the move and stated that the pricing competition is beneficial for the sector, particularly for Nigerians and the general public.
He pointed out that since player competition is predicted to intensify in the upcoming months, the move signifies complete deregulation of the sector.
He underlined the need to handle things more effectively to optimize the situation's advantages and guarantee that Nigerians receive a better bargain.
Competition is functional
The PETROAN President emphasized that the industry prefers a variety of supply sources, such as imports, Dangote, NNPC, and modular refineries.
He asserts that competition—especially with imports—is what keeps local prices from rising over import parity, ensuring affordability and sustainability.
“We won’t say that because we support in-country refining, we won’t patronize imported products if they are cheaper. No, we will. It is now up to importers to be more efficient by sourcing quality products at the best available price,” he said.
He maintained that people who work in the petroleum importation industry are fully aware of how unstable the industry is and how price swings can affect both earnings and losses.
Source: Getty Images
Importers negotiating price reduction
Speaking on condition of anonymity, a senior official of a significant downstream marketer that deals with the distribution, importation, and sale of petroleum products also told the Daily Sun that importers were already negotiating price reductions with some of its bulk purchasers.
“For us, survival comes first at this moment. What we have in our tanks does not align with the current market price. So, we are engaging our customers to pick up products at a discounted rate to safeguard our investments.
“At the moment, our focus is not on profit but on cost recovery. The risk of inaction is high because we cannot predict what will happen next. If these two players decide to further reduce prices this week, we will incur even greater losses.
“We are currently losing on two fronts: first, due to price differentials, and second, because of turnaround time. We hHe added that the circumstances will compel importers to look for more effective ways, such as locating less expensive goods elsewhere.ave lost patronage,” he added.
He further stated that the situation would force importers to seek more efficient strategies, including sourcing cheaper products from other countries.
Dangote’s petrol price slash 'bad news' for importers
Legit.ng reported that the most recent PMS price cut announced by the Dangote Petroleum Refinery may cost importers of Premium Motor Spirit (petrol) an average of N2.5 billion per day and N75 billion per month.
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According to Punch's findings, the new ex-depot price of gasoline at the Dangote refinery is over N100 lower than the average landing cost of gasoline, as disclosed by industry participants.
The new Dangote price may push marketers to sell petrol significantly below their costs, which comes at a huge cost.
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Source: Legit.ng
