Dangote refinery is subsidizing Nigeria’s petrol and diesel, official says

KEY POINTS

• A senior Dangote Group official says the refinery is subsidizing petrol and diesel for the Nigerian market.
• Petrol gantry price has climbed from 774 naira to 1,200 naira per liter following the US-Iran war and rising crude prices.
• The refinery is selling jet fuel at full market price, with airlines now paying up to 3,500 naira per liter.

Aliko Dangote’s $20 billion refinery is quietly subsidizing the petrol and diesel it sells into Nigeria, a senior Dangote Group official has revealed. The disclosure casts new light on the pricing dynamics that have airlines, drivers and policymakers all on edge.

Speaking to a reporter Monday on condition of anonymity, the official said the refinery’s 1,200 naira-per-liter ex-depot price for petrol sits well below what the market would normally bear, given the recent surge in crude prices following the US-Iran war.

Crude prices send fuel up

Specifically, Brent crude jumped from $66 a barrel on February 28 to above $100 a barrel after Iran blocked the Strait of Hormuz. The shock has rippled across petrol, diesel and jet fuel.

As a result, Dangote raised its petrol gantry price from 774 naira to 1,200 naira. Diesel prices climbed in step. Aviation fuel jumped even higher, with airlines now paying up to 3,500 naira per liter through marketers.

“With the crude price moving up steeply, we try to optimise the price of PMS as much as possible to help the public. To some extent, we try to optimise the price of AGO too. We can’t be subsidising everything, and so, we sell the jet fuel at the market price,” the official said.

Notably, the official confirmed that “optimise” in this context translates to subsidy. The refinery, in other words, is absorbing part of the cost on petrol and diesel to shield Nigerian consumers from the full force of global crude moves.

Jet fuel left at market price

However, the calculation does not extend to aviation fuel. A second Dangote Group official said the refinery sells jet fuel to marketers at 1,799 naira per liter, with prices having dipped lower in recent weeks.

Furthermore, last week’s report from the Major Energies Marketers Association of Nigeria pegged Dangote’s jet fuel gantry price at 1,732 naira per liter, while imported aviation fuel landed at 1,835 naira.

Meanwhile, fuel marketers have stayed silent on what they actually charge airlines. The gap between Dangote’s gantry price and the 3,300 naira airlines say they pay raises sharp questions about distribution markups.

Airlines push back

Allen Onyema, vice president of the Airline Operators of Nigeria, recently said Jet A1 prices have spiked from about 900 naira per liter before the Iran crisis to between 2,700 and 2,900 naira, with some marketers pushing it to 3,500 naira.

Abdulmunaf Sarina, the AON president, described the burden as unbearable in an April 14 letter to Clement Isong, the MEMAN executive secretary. He noted that the surge represents a 300 percent jump, well above the roughly 30 percent rise in international crude prices.

“Airlines have endured this burden and continued operations out of patriotism and in the spirit of service to the nation. However, the situation has now become unbearable and clearly unsustainable,” AON wrote.

MEMAN points fingers

In response, MEMAN attributed the rise to global geopolitical tensions and pushed back on the 3,300 naira figure. The marketers said their internal survey showed prices significantly lower, more than 1,000 naira below what airlines reported.

Additionally, MEMAN advised airlines to seek alternative suppliers offering more competitive rates. The standoff continues, with airlines threatening a shutdown and the Federal Government scrambling to broker peace before the wider economy feels the hit.