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London-based financial services firm, EBC Financial Group, has questioned Dangote Petroleum Refinery’s explanation for three petrol price increases implemented within nine days, saying the timing and magnitude of the adjustments did not appear to fully align with the refinery’s stated crude-cost justification.
The refinery raised its ex-gantry petrol price from N1,165 per litre on August 21 to N1,185, N1,200 and finally N1,265 by August 29, representing a cumulative increase of N100, or about 8.6 per cent.
EBC Financial Group Senior Market Analyst, David Precious, said the refinery’s explanation that its prices reflected the cost of crude purchased weeks earlier would ordinarily be expected to correspond with the timing and cost of crude entering production.
He noted that the increases varied significantly, rising by N20, N15 and N65 respectively within nine days, with the adjustments becoming larger despite a decline in international crude prices during part of the period.
"That does not make the explanation false; it has yet to account for the timing or the size of the increases," Precious said.
According to EBC, Brent crude fell from about $95 per barrel on August 21 to around $86 by August 26, while the N65 increase took effect before Brent recovered above $90 per barrel.
The firm, however, acknowledged that changes in international crude prices do not necessarily translate immediately into refinery prices because crude may be purchased weeks before production after undergoing negotiation, loading, transportation and discharge.
EBC also cited data from the Major Energies Marketers Association of Nigeria, which put Dangote's gantry price at N1,200 on August 27, compared with an estimated spot import-parity price of N1,222.32.
Two days later, Dangote's price had risen to N1,265, about N43 above the earlier import-parity reference. EBC cautioned, however, that the comparison alone did not establish that the refinery's latest price was excessive because there was no live published benchmark showing whether the import-parity figure had changed.
The price adjustments also prompted downstream marketers to revise their pump prices. National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike, said retailers had little option but to adjust prices when their acquisition costs increased.
EBC said the response illustrated how quickly changes in refinery and replacement costs could be transmitted to consumers, although it did not establish any coordination among suppliers.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority has previously identified crude sourcing, domestic refinery supply, delivery timelines, logistics and transportation costs among factors responsible for petrol price volatility.
Meanwhile, Dangote Refinery also raised its ex-gantry Automotive Gas Oil, commonly known as diesel, price from N1,750 to N1,850 per litre on September 4.
EBC recommended greater transparency in the refinery's pricing process, suggesting that Dangote publish a cost breakdown for each adjustment, including the crude cargo involved, purchase date, purchase price and discharge date.
The financial group said such disclosure would enable marketers, regulators and investors to independently assess the basis for future price changes, particularly as preparations reportedly continue for the refinery's planned stock market listing.
