BREAKING: NIGERIANS WILL SUFFER! MARKETERS POINT FINGER AT DANGOTE OVER PLANNED DOLLAR SALE OF FUEL
GREATRIBUNETVNEWS–THE move by Dangote Petroleum Refinery to dump Naira and sell fuel only in Dollars has sparked outrage, with marketers warning it will throw the country back into another round of fuel price hike.
IPMAN President cries out – ‘We spend Naira, not Dollars!’ – NOGASA warns fresh pump price hike unavoidable
Nigerians, brace up!
NOGASA JOINS THE ATTACK – CONFIRMS PRICE WILL RISE
“Echoing the position, Chinedu Ukadike, spokesman of the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA) also predicted that the refinery’s sale strategy would culminate in the increase in pump prices.”
“Ironically, it will drive pump prices up, which is not good for the economy because we are trying to manage our meagre funds to buy petroleum products.”
ITEMISED KEY ISSUES WITH FULL VERBATIM QUOTATIONS:
1. THE TRIGGER
“Dollar pricing: Blame Dangote if pump prices of fuel soars – marketers”
2. IPMAN’S BOMBSHELL RESPONSE TO DANGOTE
“I have not seen the policy statement, but if eventually there is something like that, it will definitely reverse us to another increase in pump prices of petroleum products because now we will be facing two things: the cost of exchange rate and price of crude oil.”
“These were the words with which Abubakar Maigandi National President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), riposted sharply to the move by Dangote Petroleum Refineries, to start charging the cost of petroleum products in dollars only.”
3. MORE HARDSHIP LOADING FOR NIGERIANS
“The Nation, quoted the IPMAN boss as saying the move would bring additional hardship to Nigerians including leading to another waves of hike in the pump price of the product.”
4. THE NAIRA REALITY CHECK – IPMAN BEGS DANGOTE
“In fact, that domination in dollars, it will become difficult for independent petroleum marketers because for them to source dollars is a very difficult situation as we are using Naira in Nigeria. We are asking him to allow independent marketers to be buying it in Naira since in our filling stations we pay by Nigeria’s currency.”
Billy Harry, President, Petroleum Retail Outlets Owners Association of Nigeria (PETROAN), while admitting that Dangote reserved the right to fix the prices, said the marketers would shop for dollar to buy the product, since there was no difference between Dangote and importing fuel from abroad.
The paper also quoted Muda Yusuf, Muda Yusuf is the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE) as saying that more than 70 per cent of the refinery’s crude oil feedstock is imported, and purchased in US dollars, it translates that foreign exchange is the refinery’s dominant cost component.
Explaining that even the crude sourced domestically was priced at the Naira equivalent of prevailing international crude oil prices, he said the result was that local crude confers little pricing advantage because its value remained fully indexed to global oil prices and the exchange rate.
“Against this backdrop, selling refined products solely in Naira creates a significant currency mismatch. The refinery incurs most of its production costs in foreign currency while earning revenue in local currency, exposing it to substantial exchange-rate risk.
“For any capital-intensive business, such a mismatch is commercially unsustainable. Aligning the currency of revenue with the currency of costs is therefore a rational risk-management decision.”
He argued that the new arrangement of purchasing PMS from the Dangote Refinery is unlikely to require exclusive settlement in US dollars adding that marketers or purchasers might still have the option of paying either in dollars or in the Naira equivalent of the prevailing dollar price.
This, he further contended, would be consistent with pricing practices in sectors such as aviation, where services are denominated in foreign currency but settled in Naira at the prevailing exchange rate. He added that provided the foreign exchange market remains sufficiently liquid, marketers should be able to access the required foreign exchange through the banking system.
“That is the fundamental policy challenge. If the refinery were able to source most of its crude domestically under a sustainable Naira-denominated supply arrangement, its exposure to foreign exchange risk would decline significantly. Instead, its dependence on imported crude has effectively dollarised its cost structure, making some form of exchange-rate pass-through almost inevitable,” he said.
Under this circumstance, he warned, the implication is that domestic petroleum prices will increasingly respond to two variables: movements in the exchange rate and fluctuations in international crude oil prices. A weaker Naira or higher crude prices, he argued, will translate more quickly into higher domestic fuel prices.
“Current geopolitical developments reinforce this concern. Renewed hostilities involving the United States and Iran have pushed crude oil prices back towards $84 per barrel, reversing much of the price relief witnessed in recent weeks. If these tensions persist, higher international oil prices could compound domestic pricing pressures,” he warned.
Still, the CPPE boss noted, there are also broader macroeconomic implications, adding: “Heavy reliance on imported crude will increase demand for foreign exchange to finance feedstock imports, potentially adding pressure to Nigeria’s foreign exchange market. One of the anticipated benefits of domestic refining was the conservation of foreign exchange through local crude supply. That benefit has been significantly diluted because the refinery continues to import a substantial proportion of its crude requirements.
“The enduring solution lies in increasing domestic crude availability, deepening foreign exchange stability and reducing Nigeria’s dependence on imported feedstock. Only then can the full economic benefits of domestic refining be realised.
“The first priority is to ensure adequate allocation of Nigerian crude to domestic refineries under a commercially sustainable Naira-denominated framework. This would materially reduce foreign exchange exposure, lower exchange-rate pass-through to fuel prices and strengthen Nigeria’s energy security.
“The second priority is to sustain exchange-rate stability. A stable—or preferably appreciating—Naira would reduce the cost of imported crude and moderate domestic fuel prices. Lower international crude oil prices would reinforce these gains.”
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