Dangote Refinery CEO Explains Why Fuel Prices May Remain High Despite Full Production
The managing director and chief executive officer of Dangote Petroleum Refinery, David Bird, has stated that petrol prices in Nigeria may not decline even as the refinery operates at full capacity. Bird cited ongoing volatility in global oil markets and rising supply chain costs as primary factors preventing price reductions.
Global Market Exposure Drives Pricing
During a recent media engagement, Bird emphasized that the refinery operates within the international commodities market, which directly influences both crude oil acquisition costs and refined product pricing. The facility purchases crude oil at global benchmark prices, including Nigerian crude obtained through the crude-for-naira programme, which is still priced according to international standards.
"We are fully exposed to the international commodity market. That needs to be widely understood," Bird explained. He noted that additional expenses such as global freight and insurance are incurred when transporting crude from export terminals to the refinery, further contributing to operational costs.
Nigerian Crude Accounts for Significant Portion of Feedstock
Bird revealed that Nigerian crude constitutes approximately 30 to 35 percent of the refinery's feedstock, with the remaining volumes sourced from international markets and paid for in US dollars. The involvement of multiple traders in the supply chain often adds further costs before crude eventually reaches the refinery.
The refinery has processed various crude types including:
- West Texas Intermediate
- South American crude grades
- Central American crude grades
- West African crude grades
Market Volatility Creates Pricing Pressure
The CEO highlighted significant volatility in global oil markets, noting that Brent crude prices had climbed from the mid-$60 range to approximately $118 per barrel within about a week. Simultaneously, tanker freight costs increased dramatically from around $800,000 to roughly $3.5 million per shipment.
Dangote Group's official communications noted that the refinery's exposure to global markets includes multiple cost factors:
- Crude oil prices
- Freight charges
- Insurance costs
- Financing expenses
Refinery Operations and Domestic Impact
Bird acknowledged that rising fuel prices are affecting Nigerian consumers, stating that the company is working to reduce operational costs where possible. "I fully acknowledge the pain that is being suffered. We are seeing that. We are doing what we can to ensure that we minimise costs throughout our supply chain," he said.
Despite pricing challenges, the company noted that domestic refining has improved Nigeria's fuel supply stability, helping the country avoid shortages and long queues during periods of international supply disruptions. The refinery is currently operating at its full nameplate capacity of about 650,000 barrels per day, with potential to increase output to approximately 700,000 barrels per day.
Recent Price Adjustments
The Dangote Petroleum Refinery recently increased the ex-depot price of Premium Motor Spirit (petrol) from N995 to N1,175 per litre, marking the fourth adjustment in its fuel pricing structure since March 2. Automotive Gas Oil (diesel) prices were also raised to N1,620 per litre. Industry sources confirm the refinery management has communicated updated price templates to fuel marketers.
Bird emphasized that the refinery does not receive discounted crude under the crude-for-naira arrangement, explaining that Nigerian crude is purchased at international benchmark prices. The facility continues working to meet Nigeria's fuel demand despite ongoing global market disruptions that particularly affect countries relying heavily on imported petroleum products.
