Petrol and diesel prices have dropped below their current estimated landing costs in several major Nigerian markets, even as international crude oil prices recorded significant increases.
As of 7:50 a.m. West Africa Time on Tuesday, September 15, Brent crude was trading at $108.60 per barrel, representing a 2.79% increase.
Meanwhile, the price of US West Texas Intermediate (WTI) crude rose by 4.42% to $105.90 per barrel.
The increase in global crude prices pushed Nigeria’s estimated landing cost to about N1,420 per litre for Premium Motor Spirit (PMS), commonly known as petrol, and N1,894 per litre for Automotive Gas Oil (AGO), or diesel.
Dangote sells petrol below landing cost
Despite the increase in replacement costs, Dangote Petroleum Refinery is currently selling PMS at N1,350 per litre at its gantry.
This puts the refinery’s petrol price N70 below the estimated landing cost of N1,420 per litre.
The refinery’s AGO price is also below the prevailing landing cost, with diesel selling at N1,850 per litre at the gantry compared with an estimated landing cost of N1,894.
Petrol sells below N1,350 in some markets
Some depot operators in major markets have reduced their petrol prices even further.
In Calabar, Mainland is selling PMS at N1,347 per litre, while Northwest and Soroman are offering the product at N1,345 and N1,346 per litre, respectively.
The prices are between N73 and N75 below the estimated landing cost.
Similar prices are being recorded in Port Harcourt. Masters and Liquid Bulk are selling petrol at N1,350 per litre, while TSL is offering it at N1,347.
In Warri, Nepal and Keonamex are also selling PMS at N1,350 per litre.
Diesel prices also below replacement cost
The diesel market is experiencing a similar situation, with some operators selling AGO below the current estimated replacement cost.
Data from Petroleumprice.ng indicates that African Terminal, Integrated, Duport and Ibachem in Lagos are selling diesel at N1,830 per litre.
That price is N64 lower than the estimated AGO landing cost of N1,894 and N20 below Dangote Refinery’s N1,850 gantry price.
Market participants attributed the pricing trend partly to existing inventories.
According to industry sources, some traders are currently selling products acquired when crude oil prices and replacement costs were lower.
Because those stocks were purchased more cheaply, traders can sell them below today’s replacement cost while still retaining a profit margin.
Industry sources described the situation as a growing distortion in the wholesale market, with bulk buyers holding older inventories taking a larger share of trading activity.
Dangote redirects supply to other regions
The lower petrol prices recorded in Calabar, Port Harcourt and Warri have also been linked to a change in Dangote Refinery’s distribution pattern.
Market sources said the refinery suspended product supplies to Lagos following an increase in petrol imports and redirected more of its output to other parts of the country.
The additional supply in those regions has increased competition among depot operators, subsequently putting downward pressure on wholesale petrol prices.
The development means that, despite the recent rise in international crude prices and Nigeria’s corresponding increase in landing costs, some local markets are currently recording petrol and diesel prices below replacement levels.
