N32bn Loss for Dangote Refinery Following Petrol Price Slash

The Dangote oil refinery has incurred a significant loss of N32.5bn following the recent price cut of premium motor spirit (PMS), also known as petrol.

YThis development comes as a result of the Dangote refinery’s decision to reduce the ex-depot price of petrol by N65, from N890 to N825 per litre, effective from February 27.

The petrol market in Nigeria has been experiencing fluctuations in prices, driven by factors such as global crude oil prices, exchange rates, and regulatory policies. The Dangote refinery’s price cut is seen as a strategic move to maintain competitiveness and market share amidst these fluctuations.

It was reported that the refinery had over 500 million litres of petrol in its tanks before the price cut. At the old rate of N890 per litre, the 500 million litres would have generated N445bn. However, with the new price of N825 per litre, the refinery’s expected income from the stock will be reduced to N412.5bn. This translates to a revenue loss of N32.5bn.

The consistent price reduction by the Dangote refinery has also affected fuel importers and marketers. They have lamented that they are losing billions of naira due to the price slash. According to some importers, the Dangote refinery’s price reduction has made importation less attractive, forcing them to sell below the landing cost.

Despite the losses for the refinery and importers, Nigerians have benefited from the price cut. Many filling stations have lowered their pump prices below N900 per litre, with some Nigerian National Petroleum Company Limited retail stations selling at N860 per litre in Lagos.

Industry experts have suggested that the crash in crude prices and the marginal strength the naira gained lately against the dollar would help the refinery recover its losses. Additionally, the experts project that petrol prices may drop to N800 as the landing cost now stands at N783.66 per litre, according to the Major Energies Marketers Association of Nigeria.

In conclusion, the Dangote refinery’s decision to slash the price of petrol has resulted in a significant loss of N32.5bn. However, this move has provided relief to Nigerians, who are benefiting from lower pump prices. As the market continues to evolve, it remains to be seen how the refinery will navigate these challenges and maintain its competitiveness.