“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 Group make the point very clear.
If Dangote buys 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
Thats 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 refinary for petrol even with 25 licenses issued…no one will build a refinary when he cant determine their selling price.
So today i an proud and hopeful of this new Dangote refinary. …but i must ask questions.
The laws in Nigeria dont support Dangotes Groups position. ..if Dangote buys local crude or imports international crude….he MUST sell at local prices currently at N145….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 mamdates 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 believe downstream sector will be dereguted by the time the refinary and contracts will be completed? The biggest question is this why cant 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 refinaries.
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 refinaries 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.
Lets get to work.
Its our problem. …we can fix it
Could you give us the update on the Dangote refinery, petrochemical and fertilizer project? The project currently is under development as we have virtually completed…