Rising petrol prices tighten margins for fuel importers

Nigerian fuel importers are experiencing significant financial strain as international petrol prices and freight costs surge, while the pricing set by the Dangote Petroleum Refinery continues to restrict import volumes and cap domestic market prices. A recent market report highlights concerns among participants about escalating costs.

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prices are “capped by Dangote prices”

Traders report that premiums for Ghanaian-specification petrol are higher than for Nigerian-specification fuel. This disparity arises because prices within Nigeria are constrained by the Dangote refinery's pricing, effectively setting a ceiling. Gasoline prices in Lomé, Togo, have reportedly climbed above the Dangote refinery's sales prices, eliminating potential arbitrage opportunities into Nigeria. While traders had anticipated an increase in the Dangote refinery's coastal sales price, the company has maintained its prices, although the introduction of dollar pricing may influence future costs.

Adding to the pressure, freight costs for transporting petroleum products from Europe to West Africa have risen. Vessels are repositioning, leading to increased rates. For instance, the Clean UKC-West Africa 37,000-metric-tonne freight rate was assessed at $37.12 per metric tonne, a notable increase from $29.70 per metric tonne on June 30.

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Lome values have risen above Dangote sales prices, which has ‘shut the arbitrage’, but this is not necessarily the case in Ghana.

In the diesel market, reduced availability of Russian Black Sea products is driving up the cost of high-sulphur gasoil in West Africa. The report also provides specific price assessments for gasoline and diesel in various West African locations, indicating tight market conditions. Unless international fuel prices and freight rates decrease or domestic pricing adjusts, Nigerian fuel importers are likely to continue facing tighter profit margins.

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Although traders expected a Dangote price hike, the coastal sales price remained unchanged day over day.