Dangote Breaks Silence: Why Petrol Price Cuts Are Delayed Despite Falling Crude
By Aboki Forex —
Dangote Petroleum Refinery has explained that petrol prices cannot immediately follow declines in global crude oil prices, revealing that it spent over $4.48 billion on crude oil purchases in the last two months. The refinery said it has reduced its ex-depot petrol price four times in one month, cutting more than N200 per litre, but further reductions depend on international oil market conditions.
Why Petrol Prices Do Not Drop Instantly
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. According to the company, crude oil is typically purchased weeks or even months before refining under commercial agreements linked to monthly average pricing, not 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.
Transparency on Crude Purchases and Pricing
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.
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.
Impact on Market Stability and Future Outlook
The company said 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, 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.
For Nigerian consumers and businesses, the explanation means that immediate relief at the pump is unlikely despite falling global crude prices, as the refinery works through costly inventories. However, if international oil markets stay favourable, further price cuts could materialise in the coming weeks, potentially easing pressure on the naira and household budgets.