Renowned economist and Managing Director of Financial Derivatives Company (FDC) Limited, Bismarck Rewane, has emphasized that it would be financially disastrous for the Dangote Refinery to sell petrol below its production cost. Speaking on Channels Television, Rewane explained that any refinery, including Dangote’s, is in business to make a profit, and selling below cost would jeopardize its operations.
Rewane stated, “Dangote will only produce at a price where its marginal cost equals its marginal revenue. Selling below production cost would lead to the company grounding its operations.”
He clarified that while the Dangote Refinery is committed to delivering both quality and quantity, pricing is largely influenced by the market rather than the refinery itself. “The market determines the price, taking into account global crude prices, processing costs, and guaranteed margins. No business sells below cost, as that would be suicide,” Rewane noted, urging the public to temper their expectations on petrol pricing.
He also acknowledged the excitement over the milestone of petrol lifting from the largest single-train refinery in the world, attributing the refinery’s success to the vision of Alhaji Dangote. However, Rewane emphasized that it is now “business time,” highlighting the operational focus of the refinery going forward.
On Nigeria’s inflation outlook, Rewane cautioned against over-optimism, stating that the recent dip in inflation is temporary. “The August inflation figures reflect a period before the petrol price hike and protests. Prices of perishable goods fell, but the September data will likely show a rise due to the petrol price increase,” he said. He forecasted that inflation would moderate more significantly toward the end of the year rather than in the current period.
Echoing similar concerns, Muda Yusuf, Managing Director of the Centre for the Promotion of Private Enterprise (CPPE), expressed worries about the public exchanges between the Nigerian National Petroleum Company (NNPC) and Dangote Refinery over petrol prices. He argued that such “dramatization” could deter investors and damage public perception of the refinery.
Yusuf also highlighted the importance of a social safety net, pointing out that while the removal of fuel subsidies is necessary, complete deregulation may not be feasible in an economy without adequate support systems for the poor and vulnerable. “Walking away from the subsidy issue without providing safety nets would make life unbearable for citizens, who are already economically overstretched,” he warned.
He urged the government to reduce reliance on imported products through import substitution across all sectors, which would help ease pressure on the exchange rate and strengthen the economy. “If we progressively look inward and reduce imports, we’ll be making significant progress,” Yusuf concluded.
Seunmanuel Faleye is a brand and communications strategist. He is a covert writer and an overt creative head. He publishes Apple’s Bite International Magazine.