Dangote says $4.5bn crude bill delayed bigger petrol price cuts

Dangote Petroleum Refinery has disclosed that it spent more than $4.48 billion procuring crude oil over the past two months, saying the unusually high feedstock costs explain why domestic petrol prices do not immediately mirror declines in international crude oil prices.

The refinery, which has cut the ex-depot price of Premium Motor Spirit (PMS) four times in the past month, said its latest pricing decisions reflect the gradual replacement of expensive crude inventories with cheaper cargoes rather than day-to-day movements in Brent crude prices.

In a rare disclosure, the 650,000 barrels-per-day refinery published detailed records of every crude cargo received in May and June, revealing the grades purchased, shipment volumes and landed costs in an effort to improve transparency around its pricing decisions.

The records showed that the refinery received 24 cargoes totalling 21.47 million barrels in May at a landed cost of $2.68 billion, representing an average procurement cost of $124.80 per barrel.

In June, it imported another 18.93 million barrels across 21 cargoes worth $1.80 billion, with the average landed cost falling to $95.25 per barrel.

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Combined, the refinery spent about $4.48 billion on crude purchases over the two months, even as Brent crude has since retreated to around $71 per barrel.

The disclosure comes amid growing public pressure for fuel prices to fall in tandem with international crude prices following the easing of geopolitical tensions and the sharp decline in global oil markets.

Last weekend, the Federal Competition and Consumer Protection Commission (FCCPC) raised concerns over what it described as possible consumer exploitation in Nigeria’s downstream petroleum sector, following the failure of fuel prices to decline significantly despite the recent fall in global crude oil prices.

The commission said findings from its ongoing surveillance of the downstream market showed that local refiners, depot operators, marketers and filling station operators had implemented only marginal reductions in fuel prices, despite a noticeable decline in international crude oil prices.

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In a statement issued on Sunday by Ondaje Ijagwu, FCCPC’s Director of Corporate Affairs, the commission said a review of prevailing gantry and retail prices indicated that consumers were yet to fully benefit from the easing in global oil prices.

It stated: “The Federal Competition and Consumer Protection Commission has expressed concern over findings from an ongoing surveillance of the downstream petroleum market, suggesting undue exploitation of consumers.

“A review of the gantry prices of local refiners, marketers, depot operators, and retail outlet operators revealed token reductions in prices that are not commensurate with the fall in crude prices in the global market,” the statement said.

However, Dangote argued that such expectations overlook the commercial realities of refinery operations.

“It is important to clarify that refinery pricing does not move in tandem with daily international crude oil quotations. Crude oil is procured weeks, and in some cases months, before it is processed, under commercial contracts linked primarily to monthly average pricing mechanisms rather than prevailing spot market prices,” the company said.

According to the refinery, crude oil is purchased on a Dated Brent basis, with additional market premiums, freight and logistics charges that significantly increase its actual landed cost beyond the headline Brent price commonly reported in the media.

“Consequently, the petroleum products currently being supplied from our refinery are being produced from crude inventories acquired at substantially higher costs than today’s market prices,” it added.

The company said it had nevertheless reduced petrol prices by more than N200 per litre since the end of May, including the latest N50 per litre reduction, making it the fourth cut within one month.

“Today’s N50 per litre reduction is the fourth price cut in one month, bringing cumulative reductions to above N200 per litre on PMS. This approach ensures that pricing decisions are anchored on actual production economics and inventory costs rather than short-term fluctuations in international oil markets,” the refinery stated.

Dangote also maintained that it deliberately absorbed part of the increase in crude procurement costs instead of immediately passing them on to consumers.

“Notwithstanding these elevated feedstock costs, Dangote Petroleum Refinery did not immediately transfer the full impact of rising crude prices to the Nigerian market. Instead, the refinery absorbed a substantial portion of the increase in order to support market stability, reduce inflationary pressures and shield consumers from the extreme volatility witnessed in global energy markets.”

The refinery argued that this strategy has helped stabilise Nigeria’s deregulated fuel market while keeping domestic petrol prices below those in many neighbouring countries.

It added that further reductions in petrol prices could follow as lower-cost crude purchased in recent weeks gradually enters the refinery’s production cycle.

“As procurement costs continue to decline and lower-priced inventories replace higher-cost crude stocks, Nigerians can expect further price moderation, provided international market conditions remain favourable,” the company said.

Industry analysts said the disclosure provides one of the clearest explanations yet of the lag between movements in international crude prices and domestic fuel prices, highlighting how inventory costs, long-term procurement contracts and logistics expenses shape refinery economics.

Beyond defending its pricing decisions, the publication of cargo-by-cargo procurement data marks an unprecedented level of transparency by a Nigerian refinery and offers the market a rare glimpse into the cost structure underpinning fuel production in the country’s post-subsidy era.

The refinery said domestic refining is now supplying sufficient volumes to meet Nigeria’s fuel demand, reducing dependence on imports, conserving foreign exchange and strengthening the country’s energy security.