The Minister of Finance, Budget and National Planning, Zainab Ahmed, has said that there might not be a significant change in fuel price when the Dangote refinery begins operation next year.
Ahmed said that fuel will still sell at the international price because of the location of the refinery which is at the Export Processing Zone in Lagos State.
Speaking on NTA’s ‘Good Morning Nigeria’ programme on Monday, the minister said that the advantage with the refinery is that Nigeria won’t pay shipping cost.
Zainab said, “What we are doing is enabling the petroleum sector to actually grow. There have been a number of refineries that have been licensed for several years. None of them was willing to start refining under the regime that we had were fuel was controlled.
“The Dangote refinery is sitting within an Export Processing Zone so they are insulated from that. When we buy fuel from Dangote, we will be buying fuel at the international market price. The only savings that we will be making is the savings of freight which is shipping.
“But we will still have landing cost; labour cost and the marketers will still have to put a margin. These refineries being refineries that are supposed to have come to operate can now come in because they are assured that when they produce, they can sell at market rate and recover their investments and make some reasonable profits.”
She said that investments in refineries will be encouraged due to the deregulation of the sector which is good for the economy despite it leading to an increase in fuel price.
Pointing out the need to encourage private refineries, the minister said that government-owned refineries won’t be rehabilitated because they are old.
Ahmed added, “It will mean more refineries will open, they will employ people and fuel will be available in different parts of the country and not just relying on the government refineries.
“Those refineries are old and even if we turn them around, we will not be able to operate them at optimal capacity so while the NNPC is trying to rehabilitate them, we also need to encourage the private sector refineries to come on stream and even state governments that have the capacity.”
Buttressing her point, the Minister of State for Petroleum Resources, Timipre Sylva, said that refining crude oil locally won’t have a significant effect on fuel price.
According to him, crude oil is what determines the cost of petrol, and as long as it remains high in the international market, fuel price will be affected.
He also said that if crude oil is refined locally – which will save the cost of transporting – the cost of labour which includes hiring expatriates will still have an effect on fuel price.
The minister added, “For now, our supply is coming mostly from imports as we all know. And that doesn’t really have an impact on the price as people would think. The only difference that will happen if our supply was coming from in country would have been the freight price. But whether it is coming from outside or coming from within, it will be about the same cost because when you import, the only difference is that you will have to pay the freight. But it is the same cost of crude and whether you are refining or not, you will have to pay the market price for the crude.”
Operations at the Dangote refinery will commence next year and is expected to refine 650,000 barrels of crude oil per day.
