“The key issue is that if I buy crude whether from Nigeria or anybody, I buy at an international price. If I produce product and want to sell, I should sell that product at an international price. So, I would not be affected by the decision of local pricing, it is on that concept that we went into refining” – Engr. Mansur Ahmed, Director, Dangote Group March 2016
Dangote make the point very clear.
If they buy local crude oil at “international prices they will sell that Locally refined petrol at “international prices”.
They are 100% correct
Currently in Nigeria, crude oil is allocated to NNPC who refine offshore at international prices but sell at local prices of N86.50
That’s why we have the subsidy….we have to cover differences between local crude oil and imported petrol.
This is slso why we have no new refinery for petrol even with 25 licenses issued…no one will build a refinery when he can’t determine their selling prices.
So today i an proud and hopeful of this new Dangote refinary. …but I must ask questions.
Currently the laws in Nigeria don’t support Dangote’s position. ..if Dangote buys local crude or imports international crude….he MUST sell at local prices currently at N86.50….
In 2013, The Federal High Court in Abuja, declared as unconstitutional, illegal, null and void a proposal by the Federal Government to deregulate the prices of petroleum products in Nigeria.
The Petroleum Act and the Price Control Act mandates fixing the prices of petroleum products as mandatorily required….
So is Dangote investing $14b in a project where he is not sure of his selling prices? Or does Dangote believes downstream sector will be deregulated by the time the refinery and contracts will be completed?
But the biggest question is this why can’t the President signal there will be a process to deregulate the downstream sector so that more “Dangotes” can begin the process of raising funds to build more local refineries.
The ONLY policy that will ensure availability and right petrol prices is COMPETITION…… Liberalization by deregulation is what ensures competition.
What is very clear is this…..the policy of fixing local prices of imported products thus creating a subsidy regime and removing the private incentive to build local refineries has failed.
If it has failed…..why are we still retaining it?
The PIB creates the legal framework for a liberalized downstream. …even if there is no PIB….any signal from the Executive on amending these laws will elicit a positive response from the private sector.
Let’s get to work
Its our problem. …we can fix it.
