Another era of dollarised petrol pain

Nigerians are bracing for further economic hardship as the Dangote Refinery, the nation's leading refiner, has decided to price its ex-depot petrol sales in U.S. dollars instead of the local naira.

Initially, the refinery set its ex-depot petrol price at $0.779 per liter. Following public outcry and demands for more affordable fuel, the refinery reversed this specific decision but simultaneously increased the pump price by N140 per liter. Petrol now costs between N1,250 and N1,400 per liter, offering consumers minimal relief. When dollar-denominated pricing was first introduced in early July, diesel was priced at $1.087 per liter, kerosene at $0.942 per liter, and coastal petrol deliveries at $1,044.62 per metric ton. This transition immediately impacted benchmark prices for diesel and aviation fuel.

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Since it procures crude feedstock from the Nigerian National Petroleum Company in dollars, it was only logical to sell refined petroleum products in the same currency.

The refinery stated that since it procures crude feedstock from the Nigerian National Petroleum Company in dollars, it is logical to sell refined products in the same currency. This uniform pricing framework, according to Dangote, aims to eliminate the currency mismatch inherent in purchasing crude in dollars while selling refined products domestically in naira. While commercially understandable, this decision exposes Nigeria's domestic fuel market more directly to international crude oil price fluctuations and exchange rate volatility.

The consequences are likely to include heightened inflation, reduced purchasing power, increased transportation costs, rising rents, and additional pressure on businesses and households already facing financial strain. The move also brings to the forefront significant legal and policy considerations. Section 20(5) of the Central Bank of Nigeria Act, 2007, stipulates that refusing the naira as legal tender or pricing goods and services in another currency without prior Central Bank approval is an offense. Although the act recognizes the naira as the sole legal tender for domestic transactions, it does include regulatory exceptions for sectors like oil and gas, maritime, and aviation.

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Adopting a uniform pricing framework eliminates the currency mismatch created by purchasing crude in dollars while selling refined products domestically in naira.