Dangote’s decisions projected to reduce the cost of living in Nigeria

The Dangote Refinery took a bold step over the weekend: a considerable price reduction for Premium Motor Spirit (PMS), commonly referred to as petrol.

• Dangote Refinery reduced petrol price from N950 to N890 per liter
• Reduction in response to favorable global energy sector and decrease in international crude oil prices
• Marketers wary of challenges and opportunities with sudden price cut

The refinery, on Saturday, disclosed to Nigerians that it had decided to reduce its petrol price from N950 to N890 per liter.

“In a bold move to drive economic relief for Nigerians, Dangote Petroleum Refinery has reduced the ex-depot price of Premium Motor Spirit, commonly known as petrol, from N950 to N890 per liter, effective from Saturday,” the Group’s Chief Branding and Communications Officer, Anthony Chiejina, stated.

“This price adjustment is in response to favorable developments in the global energy sector and a significant decline in international crude oil prices.

Dangote refinery’s decision reflects its commitment to aligning with market realities and ensuring that consumers benefit from changes in international crude oil prices,” he added.

This as expected has sent shockwaves across the oil market, which currently averages around N970 to N990 as PMS price.

A report by the Punch newspaper highlights this fact, having spoken to some mjaor players in the country’s oil sector.

Marketers told the aforementioned outlet that the Dangote refinery’s abrupt price cut was likely brought on by recent warnings that specific marketers were planning on importing PMS if the foreign product remained lower than the ex-depot pricing of locally refined goods.

In response, the Dangote refinery moved to proffer competitive rates.

This, according to marketers could present some challenges as well as opportunities.

IPMAN’s opinion on Danagote’s price cut

“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,” the Vice President of the Independent Petroleum Marketers Association of Nigeria, Hammed Fashola, stated;

“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,” he added.

He also noted that when prices fall, the only alternative for a marketer is to lower the price to liquidate old stockpiles, or they will 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 neighborhood 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.

“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,” he added.

How Dangote could affect cost of living

Additionally, the National President of the Petroleum Products Retail Outlet Owners Association in Nigeria, relayed that this sort of move could improve the overall quality of life in Nigeria.

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“The reduction in PMS ex-depot price is expected to have a far-reaching impact on the lives of Nigerian citizens.

With a decrease in the cost of petrol, the prices of goods and services are likely to decrease, leading to a reduction in the overall cost of living.

This, in turn, will provide relief to households, who will have more disposable income to allocate towards other essential needs,” he said.

“The reduction in PMS price will also have a positive impact on the economy. A decrease in transportation costs will lead to increased economic activity, as businesses will be able to transport goods and services more efficiently and at a lower cost.

Additionally, the reduction in PMS price will lead to an increase in demand for goods and services, which will have a positive impact on economic growth and development,” he added.

Source: Punch