The Central Bank of Nigeria (CBN) argues that raising petroleum products from the Dangote Refinery in Lagos will reduce transportation costs and food inflation.
CBN Governor Olayemi Cardoso revealed this during a press briefing on Tuesday following the 297th meeting of the Monetary Policy Committee (MPC) in Abuja.
“The committee expressed optimism that the lifting of refined petroleum products from Dangote Refinery will moderate transportation costs and significantly support the easing of food price pressures in the short to medium term.
“This is also expected to moderate foreign exchange demands for importation of refined petroleum products with a positive spillover on external reserve and improvement in the overall balance of payment position,” Cardoso said.
The CBN chief announced the committee’s decision to hike the Monetary Policy Rate (MPR) by 50 basis points from 26.75% to 27.25% to control inflation, currently at 32.15%.
According to the National Bureau of Statistics’ (NBS) latest Consumer Price Index report, headline inflation fell to 32.15% in August 2024, while food inflation was 37.52%.
The NBS reported that food inflation in August 2024 was 37.52% year on year, 8.18% higher than the rate in August 2023 (29.34%).
It said the rise in food inflation on a year-on-year basis was caused by increases in prices of the following items, bread, maize, grains, guinea corn, bread, cereals yam, Irish potatoes, water yam, cassava tuber, palm oil, vegetable oil, among others.
Cardoso said, “On food inflation, the upside risk remains flooding, hike in energy prices, scarcity of PMS, and most importantly, security in farming communities.
“Considering the weight of food in the CPI (consumer price index, which measures inflation) basket, (MPC) members recognise the efforts of the Federal Government in addressing insecurity in the farming community and stressed the need to remain steadfast.
“In addition, the MPC applauded the ongoing efforts of the Federal Government of Nigeria to bridge the supply deficit through duty-free import windows for food commodities.”
The Nigerian National Petroleum Company Limited (NNPCL) loaded the first batch of petrol from the Dangote Refinery in mid-September. The private refinery supplied petrol at N898 a liter.
Before taking petrol from the Dangote Refinery, NNPCL retail outlets in Lagos sold it for roughly N855, but a litre of Dangote petrol would cost N950 in Lagos and N1,019 in Borno.
Dangote Refinery refused supplying petrol to the NNPCL for N898. NNPCL contended that it received petrol from Dangote Refinery at N898 per litre and demanded the latter to reveal the price at which it sold petrol. The NNPCL provided a breakdown of pricing for Dangote petrol sold at its filling stations nationwide.
The Independent Petroleum Marketers Association of Nigeria (IPMAN) argues that selling petrol from the Dangote Refinery at a higher price than imported fuel is unsustainable.
Last December, Aliko Dangote, Africa’s largest industrialist, began operations at his $20 billion factory in Lagos, producing 350,000 barrels per day.
The refinery, which was previously hampered by regulatory disputes, wants to reach full capacity of 650,000 barrels per day by the end of the year.
The refinery has begun to deliver diesel and aviation fuel to the country’s marketers, as well as petrol.
Nigeria, Africa’s most populous country, is facing energy issues, with all of its state-owned refineries inoperable. The country relies significantly on imported refined petroleum products, with the state-owned NNPC being the primary importer of these critical commodities.
Fuel lineups are widespread throughout the country. Petrol prices have tripled since the termination of subsidies in May 2023, from around ₦200/litre to over ₦1000/litre. This has compounded the woes of consumers who rely on petrol to operate their vehicles and generate energy due to the decades-long erratic supply.
