- Dangote Refinery’s Pricing, Higher Freight Costs Put Pressure On Fuel Importers
- The refinery’s pricing continues to limit profitable import opportunities.
- Higher freight charges are further squeezing fuel importers’ profit margins.
Nigerian fuel importers are facing increasing pressure as rising global petrol prices and higher freight costs continue to push up import expenses, while the Dangote Petroleum Refinery’s pricing strategy limits opportunities for profitable fuel imports.
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EKO HOT BLOG reports that this was disclosed in the latest Daily Refined Products Commentary by S&P Global Commodity Insights, which said market participants remain concerned about the rising cost of imported petroleum products and the narrowing margins available to importers.
According to the report, traders said the Dangote refinery’s pricing has effectively capped petrol prices in Nigeria, making it difficult for imported products to compete in the local market.
A market participant noted that premiums for Ghanaian specification petrol remain higher than Nigerian specification fuel because prices in Nigeria are constrained by Dangote’s pricing.
The report stated that petrol prices in Lomé have risen above the Dangote refinery’s selling price, effectively eliminating arbitrage opportunities into Nigeria.
“Lome values have risen above Dangote sales prices, which has shut the arbitrage, but this is not necessarily the case in Ghana,” the report stated.
Despite expectations that the refinery would increase its coastal sales prices, S&P Global said Dangote kept prices unchanged, although its recently introduced dollar based pricing could influence future market trends.
The report also identified rising freight costs as another challenge for importers. Freight rates for transporting petroleum products from Europe to West Africa have increased as vessels reposition across key shipping routes.
According to Platts, a division of S&P Global Commodity Insights, the Clean UKC to West Africa 37,000 metric tonne freight rate rose to $37.12 per metric tonne, up from $29.70 per metric tonne recorded on June 30.
S&P Global added that tighter supplies of Russian Black Sea diesel have also increased the cost of high sulphur gasoil across West Africa.
The report concluded that unless global fuel prices and freight charges decline or domestic pricing changes, Nigerian fuel importers are likely to continue operating under significant pressure, with the Dangote refinery remaining a major influence on the country’s petrol import market.
