The coming on stream of Dangote Refinery may not result in lower price of petrol products as the federal government says Nigeria will still buy the product from the Lagos based refinery at international price.
Minister of Finance, Budget and National Planning, Zainab Ahmed who made the remarks yesterday said the Dangote Refinery may not make significant effect on the product when the refinery kicks off in 2020. Her reason is that the refinery is built to serve or sell to external market at the international price.
Speaking during a live programme on the Nigerian Television Authority yesterday, Ahmed explained that the refinery is located at the Export Processing Zone in Lagos State to product fuel products for export.
“When we buy fuel from Dangote, we will be buying at the international market price,” the minister said while speaking at the live show on the state owned television.
Based on that, the minister said government is working to enable the nation’s petroleum sector to grow. She lamented the fact that a number of refineries that have been licensed for several years have refused to commence operation. Ahmed noted that none of them was willing to start refining under a regime where fuel price was being controlled. “
The federal government had announced the removal of fuel subsidy to allow market forces of demand and supply to determine the price of the product. Nigeria currently operates a managed deregulated fuel regime.
The Dangote refinery is sitting within an export processing zone so they are insulated from that. However, the finance minister stated that Nigeria will benefit from the building of the refinery as she said 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 those 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.”
“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,” the finance minister added.