‘Nigeria must address root challenges to achieve lower petrol price’

Managing Director and Chief Executive Officer of Pinnacle Oil and Gas Ltd., Bob Dickerman said Nigeria can achieve lower petroleum products prices in Naira if the government is ready to take the necessary steps.

Dickerman said this while speaking at an event organised by the Nigerian Association for Energy Correspondents (NAEC) in Lagos.

“We must address the root problem, restoring global confidence in Nigeria’s economy and currency, creating foreign investment in jobs and local production, increasing tax revenue, and achieving fiscal prudency is the only way to lower petroleum products prices in naira,” he said.

Dickerman acknowledged the widespread anxiety in the downstream sector but urged for a clearer understanding of the market dynamics.

He emphasized that while the petroleum sector is currently experiencing major changes, much of the confusion is preventable.

“There is tremendous anxiety and confusion regarding what’s happening in the petroleum space in Nigeria, particularly the downstream sector,” Dickerman said.

“The anxiety is justified, but the confusion is preventable. Everyone is entitled to his own opinion, but not his own facts.”

Dickerman urged the public to focus on understanding the roles of key players in the market and how their incentives shape their behaviour.

He noted that while the Dangote Refinery is a major development, it remains a private business driven by market economics, just like any other global refinery.

“The speculation that this arrangement is the result of some dubious plot to benefit one party or another is all nonsense. It is simply one consequence of the subsidy.

“Other consequences of the subsidy are that there is no competitive market here at any class of trade, NNPC is in full control of national distribution, and Nigeria’s prices remain far lower than neighboring countries, creating smuggling incentives.”

According to Dickerman, Nigeria National Petroleum Company Limited (NNPCL) is a key player in the domestic market, operating both as a profit-making enterprise and as the National Oil Company responsible for executing national policies.

He highlighted that the crude oil available for sale by NNPCL has been steadily declining due to production challenges, rising government debt, and the need to fund large subsidies, particularly on gasoline and electricity.

Dickerman also addressed several misconceptions circulating in the media about the pricing of petroleum products.

He noted that crude oil and petroleum products are globally priced in U.S. dollars, and any product imported into Nigeria must be paid for at international market rates, adjusted for local factors.

“The big news of course is the recent production of distillates and now gasoline by the Dangote Refinery. But there’s a flood of opinions across the media on what this means.

“Some say prices will drop to 400-500 Naira, others believe Dangote is raising prices to maximize profits. Both are incorrect.

“The reality is that Dangote Refinery, like any private business, has to optimize its operations, and prices are influenced by global market forces.”

Dickerman explained that while Dangote Refinery’s production reduces Nigeria’s dependence on imports, it is unrealistic to expect significant price reductions.

He pointed out that the Naira’s depreciation, rather than market manipulation or government policy, has been the primary driver of recent fuel price increases.

“When we import products, whether the buyer is NNPC Trading Limited (NTL) or a private marketer, we must pay the global market price, and that price is in dollars,” he said.

“When it is re-sold in Naira, the market price is the USD price converted to Naira at the current FX exchange rate, which is currently around N1700. Any price below that is a result of a government subsidy.”

Dickerman also acknowledged the continued existence of fuel subsidies, which create artificial pricing in the domestic market.

He noted that NTL remains the only entity able to import fuel, purchase Dangote’s gasoline, and sell it at a subsidized price.

Dickerman stressed that while Dangote Refinery represents a significant step forward in terms of local production capacity, it is important to understand that the refinery, as a private venture, operates with both equity and debt.

“Most of the debt is in U.S. dollars, and the refinery’s investors have every expectation of selling their products at market prices to achieve a return on their investments,” he said.

“Dangote Refinery can also export its products at market prices to neighboring countries or other buyers globally. If you own a business that can sell a product at a higher price internationally, why would you sell it locally at a lower price? The idea that Dangote’s production will drastically reduce prices in Nigeria is based on a faulty assumption.”

Dickerman urged the government and stakeholders to focus on long-term solutions to Nigeria’s economic challenges, arguing that stabilizing the Naira and restoring global confidence in the Nigerian economy are the only viable ways to reduce fuel prices.