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By Adewale Sanyaolu
Petroleum marketers and importers in Nigeria’s downstream sector are grappling with shrinking profit margins as fragmented pricing disrupts the market, forcing many to sell petrol at rates barely covering costs.
Caught up in the price war, they are currently battling to reduce mounting losses by eyeing other markets.
Despite price cuts, low-level margins have continued to compound their woes.
Central to the threat facing marketers’ investments is the fierce price war between Dangote Refinery and NNPC Limited, which has driven the price of Premium Motor Spirit (PMS), commonly known as petrol, down from N950 to N860 per litre.
According to yesterday’s (Wednesday) industry statistics computed by the Major Energy Marketers Association of Nigeria (MEMAN), the ex-depot price of petrol was N830 to N835 per litre, in comparison to the N825 per litre gantry price for Dangote Refinery.
At the moment, marketers are at a crossroads in a bid to offload old stocks, with some selling below the landing cost to recoup their investment.
The market disruption by the two dominant market players, Dangote and NNPC, has forced most major marketers to drop prices to N860 and N870 per litre, respectively.
To ensure it gets a grip on the market, Dangote Refinery recently sealed a pact with three fuel retail outlets—MRS, Heyden, and AP—to sell petrol at its various filling stations in Lagos, other South-West states, the North, the South-South, and the South-East at prices ranging between N860 and N895 per litre.
The fragmented pricing structure appears not to have gone down well with members of the Petroleum Retail Outlet Owners Association of Nigeria (PETROAN), who have voiced their frustration to government regulatory agencies.
The association, while condemning the unhealthy competition in the downstream sector—which, it said, has resulted in a sudden downward review of fuel prices—is calling on the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and the Federal Competition and Consumer Protection Commission (FCCPC) to establish mechanisms that will ensure price stability for at least six months.
This approach, the association said in a statement signed by its National Public Relations Officer, Dr. Joseph Obele, would help reduce the uncertainty and risk associated with investments in the sector, ultimately promoting economic development and protecting the interests of consumers and Nigerians.
The association stressed that the sudden downward review of prices has resulted in massive losses for its members, with those affected counting their losses in billions of naira.
This situation, it said, poses a significant fear for further investment in the sector, as investors are wary of unpredictable market conditions.
While calling for healthy competition, full liberalization, and price stability in the downstream sector, the association urged NMDPRA to quickly swing into action to ensure fair pricing.
Stressing the need for NMDPRA’s intervention, it said: “The threat of price fluctuations is affecting the business boom of the sector, which will definitely lead to retrenchment. This will have far-reaching consequences, including job losses and economic instability.”
The association called for a collaborative approach among stakeholders, including government agencies, regulatory bodies, and industry players, to establish mechanisms that promote price stability.
“We believe that by working together—industry stakeholders, government, and consumers—we can create a vibrant, competitive market that benefits everyone.
Let us unite in our efforts to ensure that the downstream sector not only meets the needs of today but also paves the way for a sustainable and prosperous future.
This includes transparent pricing models, effective regulation, and strategic reserves that can be tapped into during times of crisis,” it read.
