By Ajibola Olaide, JKNewsMedia Reporter
NIGERIA’s DOWNSTREAM petroleum market is facing fresh pressure after Dangote Petroleum Refinery switched sales of refined petroleum products from naira to the United States (US) dollar, a move expected to require petroleum marketers to source about $1.84bn every month to sustain fuel supply across the country.
JKNewsMedia.com reports that the new payment arrangement has already pushed depot prices of Premium Motor Spirit (PMS), also known as petrol, up by more than N100 per litre, prompting concerns over another round of retail price adjustments and renewed inflationary pressure.
Industry estimates indicate that marketers will require about $60.7m daily to purchase petrol, diesel and aviation fuel from the refinery.
Petrol accounts for about $36.9m daily, equivalent to roughly $1.1bn monthly, based on the refinery’s new gantry price of $0.779 per litre.
Diesel purchases are projected at about $633.5m monthly, while aviation fuel procurement is estimated at $105.1m over the same period.
The policy has already affected depot prices, with petrol loading costs rising from about N1,137 to N1,250 per litre in several locations.
Major depots including Sahara, AIPEC and African Terminal also increased their prices. Diesel ex depot rates have also climbed, reaching as high as N1,650 per litre in some locations.
The development comes days after the Federal Government expressed optimism that petrol prices would moderate.
International crude oil prices have instead risen to about $85 per barrel, increasing cost pressures across the sector.
Dangote Refinery notified customers that, from July 13, all payments for products loaded through its gantry would be made in dollars. Existing naira invoices were cancelled and new prices quoted in foreign currency.
The refinery retained the existing payment arrangement for Liquefied Petroleum Gas.
The decision places foreign exchange obligations on petroleum marketers, who earn revenue in naira but must secure dollars before lifting products from the refinery.
Founder of Energy Business Analytics, Dr Kaase Gbako, said the refinery had shifted foreign exchange risks from crude suppliers to marketers and consumers.
He said increased dollar demand by marketers could further weaken the naira while making domestic fuel prices increasingly sensitive to movements in the foreign exchange market.
Also, Petroleum economist, Prof Wumi Iledare, said the policy aligns with global commercial realities in a deregulated market but introduces fresh operational challenges.
He said marketers would require stronger treasury management, improved foreign exchange planning and shorter inventory cycles to minimise exchange rate risks.
Former President of the Nigerian Economic Society (NES), Prof Adeola Adenikinju, also said marketers would operate much like importers despite buying products refined locally, adding that greater demand for dollars could place additional pressure on Nigeria’s foreign exchange market if liquidity remains weak.
On his part, Tradegrid Country Manager, Jide Pratt, said Dangote Refinery is legally permitted to transact in foreign currency as a Free Trade Zone enterprise but that the return to dollar pricing raises fresh questions about the effectiveness of the government’s naira for crude programme.
He called for greater transparency in linking crude supply arrangements with refined product pricing to reduce uncertainty in the downstream sector.
Managing Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, also described the currency mismatch between marketers’ dollar denominated procurement costs and naira based sales as the major challenge facing operators.
He said the effect on retail prices would depend on exchange rate stability and international crude prices, while businesses exposed to foreign currency obligations would remain vulnerable to volatility.
Industry groups also expressed concern over the policy.
The National President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PPROOA), Dr Billy Gillis Harry, questioned whether marketers would now be expected to source dollars from the Central Bank of Nigeria (CBN) to purchase petroleum products intended solely for domestic consumption.
Additionally, the National President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Shettima Maigandi, said the arrangement would create additional financial strain for independent marketers, who prefer transactions in naira because their customers pay in the local currency.
On the broader terms, stakeholders said the shift reflects the commercial realities of a deregulated petroleum industry while placing renewed focus on the future of the naira for crude policy, the resilience of Nigeria’s foreign exchange market and efforts to deepen domestic energy value addition.
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