REFILE-Nigeria's Dangote refinery releases gasoline into the local market

The IMF has forecast that fuel subsidies could cost up to 3% of GDP this year as the increases in pump prices have not kept up with their dollar cost. Nigeria's downstream petroleum products regulator, said in a statement that the refinery would initially supply 25 million litres of gasoline daily into the domestic market this month.

Nigeria's $20 billion Dangote oil refinery on Tuesday has begun supplying gasoline into the Nigerian market, a move its owner Aliko Dangote said will end billions of dollars spent on imports. The 650,000 barrel-per-day capacity plant on the outskirts of Lagos, started processing naphtha and jet fuel in January and is expected to reach full capacity by the end of this year. Analysts say the refinery could disrupt European gasoline exports to Africa when it operates at full capacity.

Dangote told a press briefing in Lagos that the refinery will reduce demand for foreign currency. Nigeria has been spending billions of dollars importing petroleum products, putting pressure on the naira, which has continued to weaken. "I think it will give stability to the naira, whereby you remove 40% of the demand for dollars in the market and that will actually stabilise the market," said Dangote. Pressure on the naira to meet imports of gasoline, which accounted for 20 percent of Nigeria's total imports in the first quarter of 2024, forced a second currency devaluation in February.

President Bola Tinubu has embarked on sweeping reforms, including slashing costly petrol and electricity subsidies and devaluing the naira currency twice within a year to narrow the gap between the official and parallel market exchange rates. The IMF has forecast that fuel subsidies could cost up to 3% of GDP this year as the increases in pump prices have not kept up with their dollar cost.

Nigeria's downstream petroleum products regulator, said in a statement that the refinery would initially supply 25 million litres of gasoline daily into the domestic market this month. This will increase to 30 million litres daily from October.

Following this development, state oil firm NNPC hiked the price of petrol from an average 617 naira ($0.3942) a litre to 855 naira, according to new prices displayed at its fuel outlets in Abuja and Lagos. An NNPC spokesperson did not comment on the prices.

The newly reviewed gasoline price will cut back on subsidies Nigeria pays to keep prices at the pump cheap. Gasoline from the Dangote refinery is expected to ease Nigeria's state-owned NNPC's struggles to supply the local market where fuel queues have persisted since July. However the refinery's continued success will hinge on its ability to secure feedstock, a major issue in its rift with the regulator. The Nigerian government has said it would sell crude to the refinery in the local currency to guarantee supply of feedstock. ($1 = 1,565.0000 naira)

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