Dangote Refinery Changes Petrol Pricing Formula as Nigerian Marketers Adopt European Benchmark
- Dangote Refinery has adopted Europe’s EBOB gasoline benchmark to help set its petrol gantry price
- Marketers calculate the estimated price using the benchmark, a commercial premium, petrol density and the naira-dollar exchange rate
- International price changes could affect petrol costs, but transport and distribution expenses will also shape pump prices
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Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.
Nigeria's downstream petroleum market is witnessing a significant shift as Dangote Petroleum Refinery adopts a European gasoline pricing benchmark, introducing a new method for determining petrol prices at its gantry.
The development means petroleum marketers are increasingly looking to international gasoline prices when assessing the cost of petrol supplied by the refinery.
Source: UGC
The benchmark, known as EBOB, provides a reference for calculating petrol prices based on movements in the European gasoline market.
The adjustment marks a departure from the Premium Unleaded benchmark traditionally used in much of Nigeria's petrol import trade.
Why Dangote adopted European benchmark
EBOB, published by international energy pricing agency Argus Media, has been a major European gasoline benchmark since 2002.
Its adoption provides a more widely recognised international reference for pricing refined petroleum products.
Under the arrangement, Dangote's petrol price is linked to the prevailing EBOB quotation, with an agreed commercial premium added before the final amount is converted into naira.
Consequently, movements in international gasoline prices and the naira-dollar exchange rate can influence the refinery's selling price.
How marketers calculate petrol prices
The pricing formula involves four major calculations, beginning with the international benchmark and ending with the estimated naira price per litre.
For illustration, assume EBOB trades at $800 per metric tonne, with petrol density estimated at 0.745 kilogrammes per litre.
First, marketers convert one metric tonne into litres by dividing 1,000 kilogrammes by 0.745.
This produces approximately 1,342.28 litres.
Next, dividing the assumed $800 benchmark by 1,342.28 litres gives an international gasoline value of approximately $0.596 per litre.
An illustrative commercial premium of $0.080 per litre raises the amount to approximately $0.676.
At an assumed exchange rate of N1,500 per dollar, the estimated gantry price becomes N1,014 per litre.
However, this calculation is hypothetical and does not represent Dangote Refinery's confirmed selling price.
What new pricing means for Nigerians
The new arrangement could make petrol pricing more responsive to international market movements.
When European gasoline prices decline, the benchmark component of Dangote's petrol price could fall, potentially providing relief for marketers and consumers.
Conversely, rising international prices or a weaker naira could push domestic petrol costs higher.
For Nigerian motorists, however, any reduction at the refinery does not automatically translate into cheaper petrol at filling stations.
Transportation costs, distribution margins and other operating expenses will continue to influence the final pump price.
Ultimately, the impact on consumers will depend on how quickly marketers reflect changes in their retail prices.
Dangote Refinery drops 12 marketers
Legit.ng earlier reported that Dangote Petroleum Refinery has unveiled a revised list of 25 petroleum marketers authorised to distribute its petrol across Nigeria, reducing its previous consortium of 37 companies as it restructures its domestic fuel sales operations.
The decision removes 12 marketers from the arrangement and comes amid fresh changes to the refinery's petrol pricing system.
Source: Legit.ng
