Local Refining Costs Outstrip Imports: Nigeria’s PMS Dilemma
Nigeria’s local refining sector faces an ironic paradox: despite its vast crude oil reserves, the price of locally refined petrol remains significantly higher than imported alternatives. This disparity, stakeholders argue, stems largely from the persistence of dollar-denominated charges on Premium Motor Spirit (PMS) and the cost of crude oil imports.
Data from the Major Energies Marketers Association of Nigeria (MEMAN) reveals that as of December 5, 2024, the cost of landing a litre of imported petrol was ₦958.89. In contrast, locally refined petrol from the Dangote Petroleum Refinery was priced at ₦970 per litre, while the Port Harcourt Refining Company’s product stood even higher at ₦1,030 per litre.
The Dollar Challenge
Refinery operators attribute the high cost of locally refined PMS to dollar-indexed charges imposed by regulatory agencies such as the Nigerian Ports Authority (NPA) and the Nigerian Maritime Administration and Safety Agency (NIMASA). These include jetty fees and pipeline charges, which remain pegged to the dollar despite calls for naira-based tariffs.
“We are still paying jetty charges in dollars, and this significantly impacts the final price of locally refined products,” explained Eche Idoko, Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria. He added, “Receiving fees in hard currency for commodities meant for local consumption is counterproductive and burdens the downstream sector.”
Presidential Directives and Industry Pushback
President Bola Ahmed Tinubu’s administration has mandated that crude oil be sold to local refineries in naira and that their products be sold domestically in the same currency. However, marketers and refiners contend that the directive remains inadequately enforced.
Ukadike Chinedu, National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), emphasised the need for alignment. “If any agency still charges in dollars, it undermines the President’s vision. Vessel charges, however, are a unique challenge due to their international nature and may require separate interventions.”
An official from NIMASA acknowledged the problem, confirming ongoing efforts to transition dollar-denominated charges into naira. “The process is underway. After meetings with the Dangote refinery and other stakeholders, modalities are being mapped out to ensure compliance,” the official disclosed.
Complex Pricing Dynamics
Beyond currency issues, the price disparity also reflects the complexities of crude oil imports. Local refiners, including Dangote, often source crude internationally, exposing them to volatile exchange rates and fluctuating global prices.
“If crude was imported at $80 per barrel when the exchange rate was ₦1,600 to $1, the cost implications linger until that stock is depleted. Pricing is not an immediate reflection of current market conditions,” explained a major oil dealer.
What Lies Ahead?
For decades, Nigeria has depended on imported petroleum products due to the dysfunction of its state-owned refineries. The recent resumption of operations at the Port Harcourt refinery offers a glimmer of hope, but industry experts warn that without structural reforms—including addressing dollar-based charges—domestically refined petrol may remain an expensive alternative.
Marketers advocate for freedom of choice in sourcing refined products, emphasising the need for profitability in a challenging business climate. “We will always buy from wherever gives us the maximum gain. But for local refining to thrive, government policies must ensure competitiveness,” one dealer stressed.
The nation’s downstream sector stands at a critical juncture, caught between the promise of self-sufficiency and the weight of systemic inefficiencies. Whether Nigeria can reconcile these contradictions will determine if locally refined petrol can ever compete with imports on price.
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