The recent fuel price adjustment by Dangote Petroleum Refinery has triggered widespread concern among off-takers and marketers. Many claim that fluctuations in crude oil prices and import costs have placed them in a dire financial position, with substantial losses.
Loss analysis reveals that marketers are operating at unsustainable margins due to the rising product cost and falling market prices.
Loss Analysis
The following data illustrates the financial challenges faced by marketers:
- Quantity Purchased: 10,000,000 litres
- Product Cost (per litre): ₦950.00
- Current Selling Price (per litre): ₦940.00
- Gross Margin: ₦-100,000,000.00
Additional costs, including financing, regulatory fees, and logistics, contribute to a total expense of ₦21.02 per litre. With a total landing cost of ₦971.02 per litre, marketers are incurring a net margin loss of ₦31.02 per litre or a total loss of ₦310,159,109.59.
Calls for Intervention
Marketers have expressed concerns about their inability to sustain business operations under the current pricing conditions. One off-taker stated, “Our budgeted sales margin was feasible when the Proforma Invoice (PFI) was issued. However, immediately after making the payment, the market price began to drop. This has left us operating at a loss.”
Another marketer complained, “If Dangote does not reduce the product cost, we will be unable to continue purchasing. It seems plausible that other competitors might be getting discounted PFIs, as many are selling below product cost, which raises questions about fairness.”
The persistent drop in market prices, coupled with high product costs, has forced marketers to sell at unsustainable rates. This situation has led to calls for Dangote Refinery to urgently review its pricing strategy and provide clarity on its PFI policies to ensure equitable treatment of all marketers.
Industry Concerns
Private depot prices remain volatile, with PMS selling at varying rates. As of January 30, 2025:
- Dangote Refinery Ex-Depot Price: ₦940 per litre
- Ardova Depot: ₦945 per litre
- Wosbab: ₦947 per litre
- Aiteo Depot: ₦945 per litre
Marketers suspect potential discrepancies in pricing. One marketer questioned, “It is implausible that all competitors are selling below the product cost. Is Dangote issuing discounted PFIs to some companies?”
Crude Oil and Market Dynamics
With Brent Crude trading at $76 per barrel, a significant decline from $82 per barrel, marketers are urging Dangote Refinery to align PMS prices with falling crude costs. “We cannot sell at a loss indefinitely. The current pricing structure is unsustainable,” stated an off-taker.
Dangote Refinery’s Position
In a statement, Dangote Refinery attributed the PMS price increase to the global crude oil surge, explaining that it had absorbed approximately 50% of the international cost increases. However, marketers argue that further adjustments are necessary to reflect the drop in crude oil prices.
Government Policy and Market Stability
The “Naira for Crude Initiative” by President Bola Ahmed Tinubu has been widely praised as a step toward stabilizing fuel prices. However, off-takers believe that Dangote’s pricing adjustments will play a pivotal role in ensuring sustainability.
Marketers are appealing to Dangote Refinery to reduce product costs to mitigate losses and maintain market stability. Clarity on PFI pricing policies is also requested to address concerns of unfair competition.