Dangote Petroleum Refinery has explained why petrol prices in Nigeria do not immediately reflect declines in international crude oil prices, revealing that it spent over $4.48 billion on crude oil purchases within the last two months. The 650,000 barrels-per-day refinery said the cost of processing crude already purchased at higher prices largely determines the price of Premium Motor Spirit (PMS), rather than daily fluctuations in global benchmark prices.
High-Cost Crude Still Driving Production
According to the company, crude oil is typically purchased weeks or even months before refining under commercial agreements linked to monthly average pricing, rather than prevailing spot prices. It explained that most of its crude is acquired using the Dated Brent pricing system, with additional expenses such as market premiums, freight charges and logistics significantly increasing the final landed cost. As a result, petroleum products currently leaving the refinery are largely produced from inventories bought when crude prices were considerably higher than current market levels.
To improve transparency, the refinery released detailed records of all crude cargoes received in May and June, outlining the grades purchased, shipment volumes and landed costs. The company said the disclosure was intended to provide a clearer understanding of the factors influencing its pricing decisions.
Four Price Cuts in One Month
Despite the high feedstock costs, Dangote said it has reduced its ex-depot petrol price four times within the past month, with cumulative cuts exceeding N200 per litre, including the latest N50 per litre reduction. The refinery stated that it deliberately absorbed a significant portion of the increase in crude procurement costs instead of transferring the full burden to consumers. It said the approach was aimed at supporting market stability, easing inflationary pressures and protecting Nigerians from the sharp volatility experienced in global energy markets.
According to the company, its pricing decisions are based on actual production economics and inventory costs rather than short-term movements in international crude prices. Dangote further argued that its pricing strategy has contributed to stabilising Nigeria's deregulated fuel market while keeping domestic petrol prices below those of several neighbouring countries.
Looking Ahead
Looking ahead, the refinery expressed optimism that petrol prices could decline further as cheaper crude purchased in recent weeks gradually replaces older, more expensive inventories in its production cycle, provided global market conditions remain favourable. The clarification comes amid growing calls for lower fuel prices following recent declines in international crude oil markets. While Brent crude prices have eased in recent weeks, the refinery said expectations of an instant reduction in local pump prices fail to account for how refinery operations and crude procurement work.
