Dangote Petroleum Refinery has increased the price of petrol by 8.6 percent in eight days, lifting its gantry price to N1,265 per litre as the cost of securing crude oil continues to weigh on the economics of Africa’s largest refinery.
The latest adjustment took effect on August 29, when the refinery increased Premium Motor Spirit (PMS) by N65 per litre from N1,200.
It was the third increase since August 21 and the largest of the three adjustments.
Dangote had raised its gantry price from N1,165 to N1,185 per litre on August 21 before adding another N15 on August 26 to take the price to N1,200.
The latest N65 increase means the refinery’s selling price has risen by N100 per litre within eight days.
Its coastal price also increased from N1.582 million to N1.670 million per metric tonne.
The rapid adjustment is already filtering through Nigeria’s downstream market, where retail prices vary considerably according to location and distribution costs.
Petrol is selling around N1,310 per litre in parts of Lagos and Ogun, while motorists in some locations farther from the refinery are paying N1,350 or more. Prices are approaching N1,400 per litre in some markets.
The increases have occurred during a period of significant volatility in international crude prices, raising questions over how quickly movements in global oil benchmarks translate into domestic petrol prices.
Dangote’s position is that the price of crude on a particular trading day does not necessarily represent the cost of the barrels currently being processed at the refinery.
Crude procurement takes place ahead of refining, meaning petroleum products being sold today can originate from feedstock acquired weeks earlier under different market conditions.
The cost embedded in the finished product can therefore reflect the purchase price of earlier crude cargoes as well as transportation, financing, storage and other expenses incurred before the oil reaches the processing units.
The issue has become increasingly important for Dangote because the 650,000-barrel-per-day refinery still relies partly on foreign crude despite operating in Africa’s largest oil-producing country.
About 30 percent to 40 percent of the crude currently processed by the refinery is imported, according to figures disclosed by Chief Executive Officer David Bird.
That leaves the refinery exposed to international crude prices and the additional economics associated with sourcing cargoes outside Nigeria.
Dangote has imported grades including WTI Midland from the United States while simultaneously buying Nigerian crude for its operations.
The ability to secure sufficient domestic feedstock at competitive prices is now emerging as one of the most important variables determining the refinery’s operating costs and profitability.
Nigeria’s crude production is divided among several competing requirements, including exports, contractual commitments and domestic refining demand.
That has complicated efforts to guarantee local refiners all the barrels they require even after the introduction of policies designed to prioritise domestic crude supply.
For Dangote, the challenge is particularly significant because of the scale of the facility.
Running close to capacity requires a consistent flow of crude every month, meaning interruptions or unfavourable domestic pricing can force the company into the international market to maintain throughput.
The refinery’s coastal location provides considerable flexibility to import alternative grades, but that flexibility does not eliminate the cost implications.
Crude procurement is also becoming increasingly important as Dangote prepares to take the refinery to the capital market.
The company is targeting an initial public offering expected to raise around $5 billion, with the listing planned for October.
Potential investors are expected to scrutinise the refinery’s ability to obtain reliable crude supplies at competitive prices because feedstock represents one of the biggest costs in the refining business.
Higher crude costs can reduce refining margins if the refinery absorbs them. Passing those costs through to marketers, on the other hand, can result in higher petrol prices for Nigerian consumers.
The latest increases demonstrate how directly those upstream costs can ultimately affect the downstream market.
The economic consequences extend beyond motorists.
Petrol remains an important input for transportation, logistics, small businesses and households across Nigeria, meaning sustained increases can eventually affect the cost of moving goods and providing services.
Higher transportation costs can particularly affect food prices because agricultural produce must be moved from farming areas through wholesale markets before reaching consumers.
Businesses dependent on petrol-powered generators can also face higher operating expenses when fuel prices increase.
That creates another potential source of inflationary pressure at a time when policymakers are attempting to consolidate improvements in Nigeria’s broader macroeconomic environment.
The development also illustrates an important change in Nigeria’s petroleum economy.
The Dangote refinery has substantially reduced the country’s dependence on imported finished petroleum products and helped turn Nigeria into a growing exporter of refined fuels.
Nigeria’s seaborne petroleum-product exports have increased sevenfold since 2023, according to the U.S. Energy Information Administration, largely because of production from the refinery.
However, replacing imported petrol with locally refined fuel does not completely insulate consumers from international energy markets.
As long as crude oil is priced against international benchmarks and part of Dangote’s feedstock has to be imported, changes in global crude prices and procurement costs can continue to influence the price Nigerians eventually pay for petrol.
That exposure has become even more important following renewed geopolitical tensions in the Middle East.
Brent crude climbed back above $90 per barrel on Monday as fresh fighting between the United States and Iran revived concerns about oil flows through the Strait of Hormuz.
Sustained crude prices around or above that level could increase Nigeria’s petroleum export earnings but simultaneously raise feedstock costs for domestic refiners.
The contrasting effects mean higher oil prices are no longer an unqualified benefit for Nigeria.
For Dangote, the immediate challenge will be balancing crude procurement costs with competitive petrol pricing while maintaining sufficient feedstock to keep the refinery operating at high utilisation.
For Nigerian consumers, the N100 increase recorded in just eight days shows how quickly changes in those underlying refinery economics can reach the filling station.
