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Petrol near N1,400 as Dangote defends price hikes

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The Dangote Petroleum Refinery has defended its latest fuel price increases, attributing the upward adjustments to the cost of crude oil purchased earlier and the lengthy process involved in securing, shipping and delivering crude to the refinery.

The explanation came as the price of Premium Motor Spirit (petrol) climbed further across the country, with the product now selling between N1,310 and N1,400 per litre, depending on location.

Petrol is currently selling for about N1,310 per litre in Lagos and Ogun states, while the price has risen to N1,350 or more in northern states and other locations farther from the refinery.

The latest increase followed the Dangote refinery’s decision to raise its PMS gantry price by N65 per litre, from N1,200 to N1,265, effective August 29. It was the third increase announced by the refinery in eight days.

It was observed that the price hikes occurred even as global crude prices were declining, despite the US-Iran tensions.

However, a senior executive of the Dangote refinery, who spoke with The PUNCH on condition of anonymity because he was not authorised to speak publicly on the matter, said the prevailing international crude price could not be used as the sole basis for determining the cost of petrol being produced from crude already purchased by the refinery.

The executive explained that there was a significant time lag between when crude was purchased and when it eventually arrived at the refinery for processing.

Raising a series of questions, he said, “If you want to buy crude at today’s price, when do you think you will complete the actual transaction to purchase the crude? When will you get a laycan? When can you get a ship chartered and a charter party agreement signed? When will the ship go to load the crude and secure the laycan for discharge? When is the sailing time before the crude eventually gets into your tank?”

He also questioned how the refinery would account for large volumes of crude purchased earlier when prices were higher. “And what will happen to the huge quantities of expensive crude that you bought long ago and stored in the tanks? These are the factors determining the change in prices, not an immediate crude price change,” the source stated.

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The explanation provides Dangote’s defence against criticism that its repeated petrol price increases have come despite a decline in international crude benchmarks.

The refinery first increased its gantry price from N1,165 to N1,185 per litre on August 21. Five days later, it raised the price by another N15 to N1,200 per litre, effective August 26. On Saturday, August 29, it announced another N65 increase, taking the price to N1,265 per litre.

The three adjustments have therefore raised Dangote’s gantry price by N100 per litre in eight days, representing an increase of about 8.6 per cent. The latest increase also moved the refinery’s coastal PMS price from N1,582,380 to N1,669,545 per metric tonne.

In its price communication, the refinery directed customers to return their existing Authorisations to Collect for repricing, stating that a new volume contract would be issued for immediate loading resumption.

The PUNCH reports that the impact of the latest adjustment is already being felt in the retail market, with petrol now selling at about N1,310 per litre in Lagos and Ogun and N1,350 or more in parts of the North and other distant markets.

In some locations, the product is approaching N1,400 per litre, it was gathered. The difference in pump prices across locations is partly linked to the cost of moving petrol from the coastal refinery and depots to distant markets, with transportation and other distribution expenses adding to the cost of the product.

This is one of the reasons the Dangote refinery plans to extend its free distribution scheme across the country.

The latest increase has also raised questions over the relationship between international crude prices, the cost of refined products and the pricing decisions of domestic refiners.

Data contained in the Major Energies Marketers Association of Nigeria’s Energy Bulletin for August 27 showed Dangote Refinery’s PMS gantry price at N1,200 per litre on August 27.

See also  Nigeria faces lubricant squeeze as imports tighten globally

More importantly, the estimated spot import-parity price of petrol into tanks stood at N1,222.32 per litre, while the NPSC-NOJ spot estimate was N1,221.32 per litre. This meant that, as of August 27, Dangote’s N1,200 gantry price was N22.32 below the spot import-parity estimate of N1,222.32 per litre.

However, two days later, the refinery raised its gantry price to N1,265 per litre, putting the new price N42.68 above the August 27 spot import-parity estimate. It is yet to be confirmed whether or not the import parity is still at the August 27 rate.

The crude market has remained volatile amid geopolitical tensions involving Iran and the United States and uncertainty over crude flows through the Strait of Hormuz.

According to Oilprice.com, Brent crude closed at $88 per barrel, while WTI closed at $83 on Friday, indicating a 5 per cent drop. But the Dangote executive argues that such daily movements do not necessarily correspond with the cost of crude already acquired by a refinery.

Crude procurement, according to him, involves negotiating and completing the transaction, securing a loading window, chartering a vessel, loading the cargo, sailing to Nigeria and securing a berth before the crude can be discharged into the refinery’s storage tanks.

Therefore, crude being processed at a particular time may have been purchased when the international price was substantially different from the prevailing benchmark.

The executive also pointed to the refinery’s existing inventory, arguing that large quantities of crude purchased at higher prices remain in storage. The refinery’s position is that reducing the price of petrol immediately whenever the international crude benchmark falls could mean selling products made from expensive inventory at a price based on cheaper replacement crude.

The issue is particularly significant for Dangote because the refinery does not rely entirely on Nigerian crude. Reuters reported on August 26 that between 30 and 40 per cent of the refinery’s crude feedstock was being imported.

The latest price hikes have, nevertheless, heightened concerns among petroleum marketers, who have warned that the volatility is making it difficult to plan their businesses.

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The National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike, said marketers were dealing with several factors that could push up the cost of petrol.

“We are facing the challenges of the volatility in the market. There are policies of the government, policies of the international market, and exchange rates. These are inherent dispositions to the increase in pump prices. We are not refiners to be able to determine the price of petroleum products.”

He, however, acknowledged that Dangote had previously reduced its petrol price in response to movements in the international market. “But, I also believe that Dangote has been consistent in terms of reducing its price in line with the international market rate. With this situation now, we cannot, at this particular point in time, structure our business. It’s going to be too difficult for us to structure our business,” he stated.

Ukadike also warned that continued tensions between Iran and the United States could worsen price irregularities. “The more the Iran and United States crisis continues to persist, the more we’ll be having these irregularities in price,” he added.

The IPMAN official said the price fluctuations were already being reflected in the cost of petrol across the country. “Also, bear in mind that the price of crude oil is determined by the international market. So, for all the independent marketers, we will continue to strive. Prices have been fluctuating, and we are still loading. The price of petrol will continue to be volatile as long as the price of crude is not stable and other factors relating to the financial situation,” Ukadike noted.

Ukadike said marketers and consumers were ultimately bearing the consequences of the price movements. This is coming at a time when the presidential candidate of the African Democratic Congress, former Vice President Atiku Abubakar, said he would reintroduce fuel subsidies to reduce hardship and the cost of living.

Source: punchng.com

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Read how Nigerians tap savings, loans to buy Dangote refinery shares

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Some Nigerians seeking to invest in the Dangote Petroleum Refinery and Petrochemicals FZE Initial Public Offering have turned to personal savings, loans and proceeds from the sale of assets to raise funds to buy shares, Saturday PUNCH has learnt.

Findings by our correspondents revealed strong interest in the shares among prospective retail investors, some of whom said they expected the investment to yield substantial returns in the future.

While some respondents said they were dipping into savings or raising funds through other means, others said the prevailing economic hardship had made it difficult for them to participate in the offer.

The refinery opened its IPO on Monday, September 14, giving Nigerians an opportunity to own equity in the company.

The offer comprises 4.1 billion ordinary shares priced at N525 each, with the company targeting about N2.15tn to part-fund an expansion that would nearly double the refinery’s capacity to 1.4 million barrels per day.

The minimum subscription is 10 shares, costing N5,250.

Dangote Group Chief Executive Officer, Aliko Dangote, said the low entry threshold was deliberately set to allow ordinary workers, including drivers, cooks and domestic staff, to become shareholders, describing the offer as “the IPO for the people.”

The offer is expected to close on October 13.

Investors turn to savings, loans

A staff member of the Federal Ministry of Works, David Adelabu, described the shares as expensive for struggling civil servants but said he considered the offer an opportunity to become a shareholder in the refinery.

He said, “I have small shares in some companies, including Glo and MTN, but Dangote’s shares will be the highest I will be buying. It is on the high side, but I feel this is an opportunity to become a shareholder in Dangote.

“I understand that the dividends are not going to be immediate, but I don’t mind even if it will entail selling a plot of land I have in Metumbi here in Minna. I will gladly do so.”

A trader in Dutse, Jigawa State, Adamu Bala, said he planned to use savings from his business to buy the shares.

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“I will not sell my house. I will use a small profit from my shop to buy,” he said.

Similarly, a civil servant, Fatima Mannir, said women in her group had started raising money through contributions, known as adashe, to participate in the offer.

“We have started raising money through adashe,” she said.

A trader in Damaturu, Yobe State, Malam Musa Ibrahim, said he invested part of his business savings after learning about the offer.

“I am using part of the money I have saved from my business.

“I believe that if I can invest a small amount now, it may become useful to me in the future. But I am also being careful because business is not easy at the moment,” he said.

Another resident, Aisha Mohammed, said she raised money by cutting down on some household expenses.

“I did not borrow money to buy the shares. I have been saving little by little, and when I heard about the offer, I decided to use part of what I had saved,” she said.

A businessman, Abdullahi Yusuf, however, said he obtained financial assistance from a friend to increase his subscription.

“I wanted to buy more shares than what my savings could afford, so I discussed it with a friend who agreed to lend me some money.

“I know that borrowing money to invest carries risks, but I am hoping that the investment will perform well. I will repay the money from my business income,” he said.

A petty trader, Hauwa Lawan, said she sold some personal belongings she no longer used and added the proceeds to her savings to finance her purchase.

“I sold some things that I was no longer using and added the money to my savings,” she said.

A farmer, Mallam Abdullahi Adamu, said he sold farm produce to raise about N500,000 to invest in the shares.

In Kano State, an investor, Abdulmalik Ibrahim, said he bought 10 shares for N5,250 using personal funds.

Hardship keeps some investors away

While some Nigerians are finding ways to participate in the IPO, others said economic pressures had put the investment beyond their reach.

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A civil servant in Kogi State, Saliu Joseph, said he would have loved to invest but had just paid his children’s school fees.

“Right now, I don’t think I can afford to participate unless a miracle happens,” he said.

A retired permanent secretary in the state, Bola Boro, also said he would not participate because he could not afford the investment at the moment.

“As a retired civil servant, I cannot afford such an amount to invest in the offer. Even though I am a fan of investment through the stock market, which I have been doing for years, I don’t think it will be convenient for me to participate considering the time frame of just one month,” he said.

A civil servant, Kuta Abdulahi, said the financial demands of his children’s education had left him unable to participate in the share offer.

“I must tell you the truth, I know about the Dangote Refinery shares, but I cannot even think of it at this time. My children are just resuming a new term in school. Where will I get the money for their school fees before thinking of buying shares? Please, I have a lot on my head,” he said.

Similarly, a vulcaniser, Ahmed Alkali, said his income was barely enough to meet his family’s basic needs, making investment in shares difficult.

“With the kind of job I do, I am working from hand to mouth. So, how can I buy shares when I have not eaten?” he asked.

Experts warn against borrowing

Investment experts, however, cautioned Nigerians against taking loans, selling properties or committing all their savings to the IPO, warning that equity investments carry risks.

Speaking with Saturday PUNCH, the Group Managing Director of Lancelot Group, Adebayo Adeleke, urged prospective investors to understand the risks associated with the capital market before committing their funds to the IPO.

Adeleke, who is also a former Secretary of the Independent Shareholders Association of Nigeria, said capital market investments should be made with funds that investors could afford to leave untouched for the long term, noting that equities were unsuitable for people struggling to meet immediate financial needs.

He said, “When you buy shares, you are buying a portion of the ownership of the business. Investment takes a lot of time to pass through gestation, to stability, to profitability. And you cannot, with any degree of certainty, predict when the company is going to turn the corner and begin to produce profits.

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“So, investment money is not the money you are likely to need in the next two months, three months, six months, even one year. If you cannot part with your money for a minimum of three to five years, the capital market is not the place to invest.”

Adeleke, however, described the IPO as a strategic investment, citing the refinery’s scale and demand for its products.

Also speaking, the Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, urged Nigerians to consider the risks associated with the investment and avoid committing all their savings to the offer.

He said, “There are plenty of risks to this business. It’s not risk-free. Things can get worse for the business. Valuation is based on expectations of what will happen in the future. Things might not go as planned. And, like we all know, equity is a risky business.”

Olubunmi particularly cautioned prospective investors against selling property or using up all their savings to invest in the offer.

He advised them to invest only a portion of their funds and diversify their portfolios.

The expert also advised those considering taking loans to buy the shares to have a separate and reliable repayment plan rather than depending on returns from the investment.

The Emir of Kano, Muhammadu Sanusi II, had earlier warned prospective investors against using their children’s school fees or selling their homes to invest in the shares.

Sanusi, who gave the warning on Thursday while speaking at the company’s roadshow in Kano, urged prospective investors to invest only money they could afford to set aside for some time, suggesting amounts such as N10,000, N20,000 or N30,000.

Source: punchng.com

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ARE NIGERIANS BUILDING CHINA’S ECONOMY WHILE NEGLECTING THEIR OWN?

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While other nations are busy producing, manufacturing and exporting, Nigeria must ask itself a difficult question: Are we building our own economy, or simply creating a bigger market for other countries?

Nigeria has a huge population, abundant natural resources and a massive consumer market. Yet the country continues to depend heavily on imported finished products—from electronics and clothing to machinery, household goods and other consumer items.

The issue is not simply about Chinese businesses or businesses from any other foreign country operating in Nigeria. Foreign investment can bring capital, technology, jobs and expertise.

The bigger issue is whether **Nigerian businesses are being given the opportunity and support to manufacture competitively at home.

Instead of remaining primarily a consumer of finished products, Nigeria needs to strengthen its manufacturing sector and move further up the value chain.

Nigeria needs to produce, not just consume.

A stronger manufacturing economy could help Nigeria:

* Create more jobs for Nigerians
* Add value to locally available raw materials
* Develop industrial skills and technology
* Reduce excessive dependence on imported finished goods
* Build competitive Nigerian companies
* Increase the country’s ability to export

The goal should not be to drive legitimate foreign businesses out of Nigeria. The goal should be to build an economy where **Nigerian manufacturers can compete, grow and eventually take Nigerian-made products to markets around the world.

The question Nigerians should be asking is simple:

**Why should Nigeria remain one of the world’s biggest markets for finished products when we have the potential to manufacture many of them ourselves?

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🇳🇬 **Nigeria must move from being predominantly a consumer nation to becoming a stronger producer, manufacturer and exporter.

What do you think?

Which products should Nigeria prioritize for local manufacturing instead of relying heavily on imports?

Share your thoughts in the comments.

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ICRC defends toll pricing on highways

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The Infrastructure Concession Regulatory Commission has defended the toll pricing structure under the Highway Development and Management Initiative, saying charges are evaluated against the quality and benefits of the upgraded roads.

In a statement made available to PUNCH Online on Thursday, the Director-General, Dr. Jobson Ewalefoh, cited the 227-kilometre Akwanga–Makurdi road corridor as an example.

He said the route has four toll gates, and motorists pay as they travel along it.

He argued that toll payments should be viewed against the previous costs imposed by the poor condition of the road, including lost man-hours, vehicle damage and accident risks.

Feedback from road users, he said, shows many motorists are willing to pay tolls where they see clear improvements in road quality.

Some drivers have expressed support for similar arrangements on other major corridors if the roads are upgraded to the same standard.

“That, to me, is the beauty of a well-structured PPP,” Ewalefoh said.

He explained that negotiators carefully consider toll pricing to keep charges fair. A portion of the revenue is set aside specifically for road maintenance. Under the concession agreements, the government does not bear additional maintenance costs for the duration of the contract.

The government must repair potholes within 48 hours, and it funds major routine repairs from the dedicated toll revenue.

Source: punchng.com

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See also  Nigeria faces lubricant squeeze as imports tighten globally
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