(Bloomberg) -- Nigeria is considering allowing billionaire Aliko Dangote’s refinery to set the price of the gasoline it sells, people with knowledge of the matter said, a move that’s poised to refashion the government’s control over what customers pay for fuel.
Until now, Africa’s largest oil producer has imported all of its gasoline and subsidized the price at a hefty annual cost. But in a major change, Dangote’s massive plant near the commercial hub Lagos is starting to locally refine gasoline.
Nigeria will allow Dangote to set the price of gasoline to petroleum marketers starting next month, according to officials with knowledge of the matter. They asked not to be identified as they’re not authorized to speak to the media.
State-owned oil company NNPC Ltd. — the sole importer of gasoline — has since August 2023 been reselling the product below market cost to temper prices, after a brief removal of the subsidy pushed up inflation and fanned public protests. This week it lifted the price by 45%, to 897 naira ($0.56) per liter, moving it closer to market prices.
The government said Dangote will be free to set its own price.
“Dangote Refinery will certainly not sell their products below market value as a business that was set up to make profit,” said government spokesman Temitope Ajayi. “I don’t see how NNPC or the federal government will control price for a private business,” he said.
The role of the petroleum industry regulator “will be to ensure products quality and fair pricing so that the business doesn’t take undue advantage of the citizens or rip them off,” Ajayi said.
The changes occur amid severe gasoline shortages in major Nigerian cities after debts incurred by NNPC, in part due to the subsidy, disrupted its ability to supply gasoline. It said it is owed 7.8 trillion naira ($4.9 billion) by the government in subsidy debts for the seven months to July.
In future, petrol marketers will be allowed to buy products directly from the Dangote Refinery, the people said. A spokesperson from Dangote Industries didn’t immediately respond to requests for comment.
“The market has been deregulated, meaning petrol prices are now determined by market forces rather than by the government or NNPC,” said NNPC spokesman Olufemi Soneye.
The facility at full capacity is expected to be able to produce about 330,000 barrels a day of gasoline, according to Randy Hurburun, senior refinery analyst at consultancy Energy Aspects Ltd. That’s more than 1% of global demand for the road fuel, which is about 27 million barrels a day. It’s more than enough to meet the UK’s entire requirement.
(Updates with a comment from the NNPC in the penultimate paragraph)
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