• FG’s import tariff sets new benchmark for Dangote, others

Sopuruchi ONWUKA

With the 15 percent tariff slammed on imported petrol and diesel, the domestic petroleum market may have lost price stabilizing force; allowing Dangote and other smaller local refiners to have a higher benchmark for retail prices.

The new tariffs, Oracle Intelligence reports, would now add significant N100 per liter to the landing cost of imported petrol; pushing retail prices proportionately from current N920 per liter or $0.636 per liter to N964.72 per liter equivalent to $0.667 per liter.

The local refineries benchmarked prices against imported fuel rates, cutting slight margins to remain competitive.

Oracle Intelligence reports that the landing cost of imported fuels primarily account for cost of the commodity, insurance and freight (cif) value at the point of discharge before adding import duty, demurrage and sundry taxes. And despite these added costs, importers still compete effectively with local refiners in the domestic fuel market where petrol is the king of products.

Interestingly, Dangote which is the Africa’s largest refiner rules the local petrol market with significant 650,000 barrels per day plant capacity; being the only functional local refinery with catalytic cracking module. Other small modular refineries in the country produce only distillates.

Nigerian National Petroleum Company (NNPC) Limited which has in the past 20 years of massive financial sleaze proved unable to revive and reactivate its four plants of cumulative 445,000 barrels per day of refining capacity continues to play spectator from the sidelines.

Although Dangote is yet to attain the nameplate capacity of its refining plant, the company declared weekend that it has continued to surpass domestic demand with suboptimal operations, consolidating its grip on the market and pushing importers to the fringes.

While the competition in the domestic fuel market continues to take dramatic angles, Dangote Refinery leaves no one in doubts that it has maintained focus on its commercial targets of maximizing returns from the market. And this has dashed hopes of cheaper fuel prices when local refining begins to displace importation.

Despite being Africa’s biggest oil producer and leading African member of the Organization of Petroleum Exporting Countries (OPEC), Nigeria currently is among few members of the group with the highest fuel prices.

According to GPP which provides live data on global petrol prices, Nigeria is the 17^th in the small list of oil producing countries where transportation fuel are supposed to be relatively cheap.

The country’s $0.636 per liter of petrol is higher than heavens above the $0,028 per liter currently obtainable in Libya, $0.029 per liter sold in Iran, and $0.035 per liter obtained in Venezuela.

In other OPEC countries of Angola, Kuwait and Algeria; petrol prices per liter are also far cheaper at $0.327, $0.342 and $0.354 respectively.

Among other peer economies, Nigeria also leads in petrol prices. Turkmenistan keeps petrol prices at $0.429 per liter; Egypt sells at $0.443 per liter; and Kazakhstan keeps it $0.458 per liter.

Bahrain has petrol price at $0.531 per liter, Bolivia at $0.541 per liter, and Qatar at $0.563 per liter. Malaysia sells petrol at $0.619 per liter and Saudi Arabia also sells at $0.621 per liter. Oman sells at $0.622 per liter to just remain above of Nigeria which currently sells at $0.636 per liter.

At the extreme end, Denmark, Israel, Iceland, and Hong Kong pay the highest per liter of petrol at $2.272, $2.296, $2.435 and $3.693 respectively.

Pundits reason that with the 15 percent import tariff on transportation fuel, government has also reset the price of fuel by default, allowing the market to work out the new prices at the retail stations. This is a novel price adjustment strategy that allows the market to address consumers and avert confrontation with stakeholders.

According to the Federal Inland Revenue Service (FIRS) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) which proposed the new tariff, the measure which would protect local refining is aligned with Nigerian Content policy and energy security objectives.

The tariff, proposed in a 10 October and approved by President Bola Tinubu on 21 October is “not revenue driven but corrective”, also aims at stabilizing the downstream market and ensuring fair pricing.

Oracle Intelligence reports that implementation of the new import tariff regime took immediate effect though with a 30-day transition period for cargoes already in transit.

But with Dangote Refinery already keeping thin gaps from the prices of imported fuels, the new tariff may have altered local fuel prices by default; setting a new price benchmark for both imported and locally refined petrol.