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Why marketers sell diesel at high rate despite Dangote’s price cut

Why marketers sell diesel at high rate despite Dangote’s price cut

The Dangote Petroleum Refinery, on Tuesday, announced a further reduction in the prices of diesel and aviation fuel to N940/litre and N980/litre respectively.

Earlier, Dangote refinery listened to the calls of oil marketers regarding a reduction in the price of diesel, as the refinery reduced the cost of the commodity from N1,200/litre to N1,000/litre.

On Tuesday, the multi-billiondollar facility announced a further reduction in the price of AGO but noted that this change was only applicable to dealers purchasing up to five million litres of diesel and above.

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“The price change of N940 applies to customers buying five million litres and above from the refinery, while the price of N970 is for customers buying one million litres and above,” the firm stated in a statement issued by its spokesperson, Anthony Chiejina.

He explained that the new price aligned with the company’s commitment to cushion the effect of the economic hardship in Nigeria.

“I can confirm to you that Dangote Petroleum Refinery has entered a strategic partnership with MRS oil and gas stations to ensure that consumers get to buy fuel at affordable prices in all their stations, be it Lagos or Maiduguri.

“You can buy as low as one litre of diesel at N1,050 and aviation fuel at N980 at all major airports where MRS operates,” Chiejina stated.

He further noted that the partnership would be extended to other major oil marketers.

“The essence of this is to ensure that retail buyers do not buy at exorbitant prices. The Dangote Group is committed to ensuring that Nigerians have better welfare and as such, we are happy to announce these new prices.

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“We hope that it would go a long way to cushion the effect of economic challenges in the country,” the spokesperson of the refinery stated.

The management of Dangote Petroleum Refinery announced a reduction in the price of diesel from N1200 to N1,000/litre less than two weeks ago.

Tuesday’s price slash marked the third major reduction in diesel prices in less than three weeks. The product sold for N1,700/litre about a month ago, but was reduced to N1,200/litre by Dangote refinery.

The facility also carried out a further reduction in the cost of AGO to N1,000/litre, before the latest slash to N940/litre. It puts aviation fuel from the plant at N980/litre.

Oil marketers still sell at high rate

Oil marketers have continued to dispense Automotive Gas Oil, popularly called diesel, at a price between N1,350/litre and N1,450/litre in various locations across the country despite repeated cuts in the price of the commodity by the Dangote Petroleum Refinery.

Although they attributed the high pump price of AGO to transportation costs, taxes and old stock in most of the tanks in their filling stations, they commended Dangote for yielding to their calls for further reduction in the price of AGO from the plant.

This also followed about N470/litre slash in the price of aviation fuel, popularly called JetA, by Dangote refinery.

Marketers blame old stock

The national president, Independent Petroleum Marketers Association of Nigeria, Abubakar Maigandi, commended the Dangote refinery for the latest reduction in the price of diesel.

He, however, stated that this would not translate to an immediate reduction in the pump price of the product due to the presence of old stock at filling stations.

“Marketers are happy about the reduction in the price of diesel from the Dangote refinery but still we are appealing to him to further reduce the price. Let them try as much as possible to see how we can get it at N800/litre.

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“However, we must state that he has tried and marketers are happy because of the reductions being carried out by Dangote refinery since they started releasing diesel into the domestic market.”

When asked to explain why marketers were still selling the commodity at between N1,350/litre and N1,450/litre depending on the area of purchase, the IPMAN president said it was because many dealers were still having the old and stock which they bought at N1,225/litre.

Maigandi said, “The price reduction by Dangote refinery will not reflect at the pumps immediately because he started selling at the rate of N1,225/litre. Many marketers bought at that price and are still selling that stock.

“So there is no way they can be able to reduce the price to below their cost price. But with time, the price of the product at the filling stations will reduce and normalise.

“Before now some stations were selling it at N1,600/litre, but now you can get it at N1,300/litre and N1,350/litre depending on the location and the distance from Lagos.”

On whether Dangote refinery had briefed marketers about when it would start pumping out Premium Motor Spirit, popularly called petrol into the market, Maigandi said, “We don’t know the time. But since he said he would start it, I know that he will do that. So we are still waiting.”

On his part, the Executive Secretary of the Major Energies Marketers Association of Nigeria, Clement Isong, said no marketer would buy diesel at N940 and sell at N950, considering the incurred costs in the business, describing diesel as a slow-moving product.

“Dangote sells its product at the loading rack at that price. The marketer has to borrow money to buy that product and hire a transporter to move that product to his filling station. To recover the cost of building, running his filling station, paying his staff and adding a margin to it to sell to the public, and diesel is a very slow-moving product. It is in your tank for several weeks without people buying and you are paying financial costs on it, all those costs are added.

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“If he is delivering to you in your location, it is cheaper because you are not going to pay the storage cost or the maintenance cost. You just take it from Dangote, you need to finance it, pay the transport to deliver to your location. He drops it with you, and you pay.”

Isong added that an average marketer has several costs to recover, noting that “he has to make a margin on top to stay in business. So, he is not going to buy it at N940 and sell it at N950, it doesn’t work for him.

“As to what he sells it, this depends on how efficient he is. If it is a one-man business, its costs are lower than if it is a business that owns 200 stations or 300 stations or 500 stations.”

Faruk Khalil
Faruk Khalilhttps://nigeriansketch.com/
Khalil Faruk (Deputy Editor-in-Chief), has a Bachelors and Master's degree in Political Science and has worked as a reporter, features editor and Deputy Editor-in-Chief respectively in a leading Nigerian daily. He has undergone trainings in journalism, photo journalism and online journalism within and outside Nigeria.

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