It looks like banks will lend up to N3.5 trillion to help with the importation of petrol, since more and more traders are choosing to do so. This is happening even though there have been attempts to boost local production, especially since the opening of Dangote Refinery, which can meet the needs of the local market.
The rise in financing for imports shows that things are changing in the sector. More marketers are now looking for loans to pay for imports, which wasn’t common in the past. More people are asking for these loans because the oil industry is becoming less regulated and the risk situation is changing, which makes banks more willing to lend money for oil imports.
In the past, banks were hesitant to lend money to oil dealers because of problems with the rules that controlled the price of gasoline. This caused a number of loan defaults. But as freedom spreads and prices become more determined by the market, people’s ideas about risk have changed. Additionally, this has made it easier for sellers to get loans for importing goods, especially since gas prices are now set by supply and demand instead of government controls.
The Nigerian Labour Congress (NLC) is worried about the way prices are set now. They say that the price of gasoline at the pump is too high compared to what it is really worth on the market. The NLC says that the price customers are being charged does not reflect the true cost of the product. This seems to be happening because marketers are manipulating the market. The union’s claims are based on the big difference between how much gasoline really costs on the market and how much it costs at gas stops. The NLC has said that the big players in the sector might be working together to take advantage of customers. This is especially true since marketers and Dangote Refinery are still in a dispute.
Experts who agree with the NLC say that the price of gasoline in the United States should go down a lot since the price of oil in the world is currently $72 per barrel. According to them, gasoline prices in Nigeria have stayed high even though the price of crude oil has gone down. In September 2024, the price of a barrel of crude oil was over $80. Some people think that the fact that gas prices haven’t changed with the price of oil around the world shows that the unregulated market isn’t working well or being clear. Deregulation was supposed to let prices move in line with conditions on the foreign market, but experts say it’s not working the way it was supposed to.
The Independent Petroleum Marketers Association of Nigeria (IPMAN), on the other hand, says that the current pricing system is a direct result of deregulation policies and is in line with how prices are set by the market. IPMAN says that the price of gasoline is based on how much it costs to buy, transport, and finance. These costs change depending on the state of the world market. The group has asked the government to focus on lowering the price of crude oil sent to local refineries. This would help bring down the price of gasoline in the whole country. They say that the current system is not to blame for the high prices; rather, the government should be blamed for not doing anything about how much local factories cost.
Many experts say that the current deregulated environment, which makes it easier for marketers to borrow money to meet supply needs, is a big reason why more loans are being asked for to pay for oil imports. The market is now more open because of deregulation, so imports can continue as an option to using local refineries. But Dangote Refinery is worried about the growing number of imports, saying that it is ready to meet domestic demand and that these imports make it harder for the country to support its own businesses. According to Dangote, Nigeria should protect its own refineries and limit the supply of gasoline, which he sees as being bad for the country.
Many marketers, on the other hand, don’t agree with Dangote. They say that being able to buy is important to keep the market competitive and avoid a monopoly that could cause prices to go up even more. Imports are also supported because they ensure a steady supply. Marketers say that competition between imported and locally produced gasoline helps keep prices low and makes sure that it is always available across the country. Seeing it this way, importing is seen as both a way to help local production and a way to protect against things like price fixing and supply problems.
Robert Dickerman, the Managing Director of Pinnacle Oil and Gas, has pushed hard for a market-based answer to Nigeria’s problems with energy security and prices. He thinks the country needs a market that is competitive and welcomes all suppliers, whether they are local factories or imports, as long as the goods are safe and of good quality. He stresses that competition is important to protect energy security, avoid supply shortages, and keep prices low for customers. Dickerman says that there is enough refining capacity in the world to meet demand and that Nigeria should adopt a market-driven method that makes prices clear and ensures a steady supply of gasoline.
Some critics say that Dangote’s plant might be able to meet all of the country’s gasoline needs. Others, like Dr. Bala Zakki, say that it’s not possible for a single refinery to meet the needs of a country with more than 200 million people. Zakki thinks that this kind of dependence would leave the market open to problems and could cause prices to go up if Dangote’s plant has any problems. He talks about how important it is to have more than one source of supply to keep the market stable and stop one player from taking over.
Even with all of these arguments, the Nigerian government has continued to back both local refineries and oil goods that are brought in from other countries. The federal government issues import permits and has said that it wants to fix up and update the country’s old factories. Some people, though, say that the government’s work to fix the plants has been slow and that imports are still a big part of the supply chain.
In addition to these economic issues, retailers who work with Dangote Refinery also have to deal with business problems. Henry Adigun, an expert in oil and gas governance, says that the problem is not just the price of gasoline at Dangote’s refinery, but also the terms of the commercial deals, which are not always good for local marketers. According to him, these business terms have a big impact on whether traders decide to import gasoline or use local refineries.
Adigun says that the problem can only be solved if Dangote Refinery and local traders are more open and flexible in their talks. He argues that improved communication and mutually beneficial agreements could help address the underlying commercial challenges that are deterring some marketers from sourcing petrol domestically.
Ultimately, Nigeria’s petroleum sector remains in a state of flux, with deregulation, importation, and local refining all playing significant roles in the country’s energy supply. While there is a clear push for greater reliance on local production, many industry players continue to see importation as a necessary complement to ensure a competitive and stable market.
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