The price of Premium Motor Spirit (PMS) or petrol will not drop significantly even when Nigeria begins to refine most of the crude oil it consumes, according to Minister of Finance, Budget and National Planning, Zainab Ahmed and Minister of State for Petroleum Resources Timipre Sylva.

Nigeria's refineries have been moribund for years, meaning that Africa's number one oil producer has to export crude oil for processing and import the finished products.

The 650,000-barrels-per-day Aliko Dangote refinery in the Lekki area of Lagos is set to commence operations next year, with Nigerians hoping that this would drive down the pump price of petrol in a recently deregulated market.

Not so fast, says Ahmed.

“The Dangote refinery is sitting within an Export Processing Zone so they are insulated from that.

"When we buy fuel from Dangote, we will be buying fuel at the international market price. The only savings that we will be making is the savings of freight which is shipping,” Ahmed said on an NTA breakfast programme, according to a report by Punch.

Ahmed said deregulation will however open up the petroleum sector for more private players, a development she says will benefit Nigeria in the long run.

The Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed [Twitter/@ZShamsuna]
The Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed [Twitter/@ZShamsuna]

“What we are doing is enabling the petroleum sector to actually grow. There have been a number of refineries that have been licensed for several years. None of them was willing to start refining under the regime that we had where fuel was controlled.

“But we will still have landing cost; labour cost and the marketers will still have to put a margin.

"These refineries being those that are supposed to have come to operate can now come in because they are assured that when they produce, they can sell at market rate and recover their investments and make some reasonable profits,” she said.

She added that, “it will mean more refineries will open, they will employ people and fuel will be available in different parts of the country and not just relying on the government refineries.

President of the Dangote Group, Mr Aliko Dangote, Minister of State for Petroleum Resources, Chief Timipre Sylva and Group Managing Director of NNPC, Malam Mele Kyari during the inspection tour of the Dangote Refinery facility. [Twitter/@NNPCgroup]
President of the Dangote Group, Mr Aliko Dangote, Minister of State for Petroleum Resources, Chief Timipre Sylva and Group Managing Director of NNPC, Malam Mele Kyari during the inspection tour of the Dangote Refinery facility. [Twitter/@NNPCgroup]

“Those refineries are old and even if we turn them around, we will not be able to operate them at optimal capacity, so while the NNPC is trying to rehabilitate them, we also need to encourage the private sector refineries to come on stream and even state governments that have the capacity.”

Petroleum Resources Minister Sylva said the pump price of petrol will not drop significantly even if Nigeria is refining crude oil locally.

Minister of State for Petroleum, Timipre Sylva (Punch)
Minister of State for Petroleum, Timipre Sylva (Punch)

He said the major determinant of the cost of petrol is crude oil and as long as it remains high in the international market, the cost of petrol at the local gas station will not drop.

“For now, our supply is coming mostly from imports as we all know. And that doesn’t really have an impact on the price as people would think,” Sylva said.

“The only difference that would happen if our supply was coming from in-country would have been the freight price.

"But whether it is coming from outside or coming from within, it will be about the same cost because when you import, the only difference is that you will have to pay the freight.

“But it is the same cost of crude and whether you are refining or not, you will have to pay the market price for the crude.”

President Muhammadu Buhari during an extra-ordinary virtual meeting. [Twitter@BashirAhmaad]
President Muhammadu Buhari during an extra-ordinary virtual meeting. [Twitter@BashirAhmaad]

The pump price of petrol in Nigeria went from N145/liter to N162/liter on September 1, with President Muhammadu Buhari clearly stating afterwards that his administration can no longer afford to subsidise the product.

A cross section of Nigerians have kicked against the new price regime and there have been a handful of street protests to boot.