Fueling economic relief
Nigeria's oil regulator will deny export permits to non-compliant producers while Dangote Refinery has lowered its petrol price from ₦950 to ₦890 per litre due to favourable global market conditions.
Nigeria’s upstream oil regulator announced it would deny export permits for oil cargoes from producers who fail to meet their supply quotas to local refineries, including Dangote Refinery. The Nigerian Upstream Petroleum Regulatory Commission emphasised that producers must fulfil their commitments or face penalties. Meanwhile, Dangote Refinery has reduced its petrol price from ₦950 to ₦890 per litre in response to favourable global energy and gas market conditions and the decline in international crude oil prices. Dangote Petroleum Refinery firmly believes that this reduction will decrease the cost of petrol nationwide, thereby driving down the prices of goods and services.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has seemingly relented under pressure from Dangote Refinery and public outcry, marking a turning point in a long-standing dispute between the regulatory body, the Nigerian National Petroleum Company Limited (NNPC), and the refinery. This concession comes amidst rising fuel prices, which are a major driver of Nigeria's persistent inflation, impacting everything from transportation costs to the price of food. The high fuel cost has a knock-on effect across the economy, making goods and services more expensive and further straining household budgets.
The conflict involved accusations from regulators that Dangote Refinery was producing substandard products, attempting to monopolise the market, and lacking proper feasibility studies. Dangote Refinery countered by criticising the NUPRC's failure to enforce a law mandating oil producers to supply local refineries, arguing that this lax enforcement was inflating its operational costs. With the NUPRC finally acting, all Nigerian refiners stand to gain.
Nigeria’s oil sector is notoriously complex. To simplify, the NNPC lacks the independent financial capacity for oil exploration and relies on partnerships with oil companies. These companies bear the financial risk, aiming to recoup their investment through crude oil extraction. Understandably, they prioritise maximising profits. However, the sanctity of contracts must be maintained. Decades of oil exploration have left Nigeria struggling to establish itself as a dependable partner, hindering its ability to assert authority. The current reliance on threats to enforce the law highlights deep structural weaknesses within the sector. This inability to effectively manage its oil resources contributes to the volatility of fuel prices and exacerbates the country's economic woes.