Dangote Refinery and Petroleum Marketers in Nigeria Set to Discuss Petrol Pricing Metrics

Well, Dangote Refinery and petroleum marketers in Nigeria will hold talks on Tuesday and Wednesday over product pricing metrics. Can Nigeria still achieve its inflation target amid recent petrol price shocks? Johnson Chukwu, CEO of Cowry Asset Management joins me now for more on this and reactions to petrol pricing metrics so far.' Mr Chukwu, thanks a lot for joining us on the show today. We've had a whole lot of feelers, meetings between Dangote and other stakeholders is expected to hold on Tuesday and Wednesday over pricing metrics. We've also heard from the Independent Petroleum Marketers Association as to why we even had the initial hike. NMPC bought petrol below N900 Naira and we are seeing how much it has sold so far, about 1,200, 1,300, 1,400 across the different pump price, pump across the nation. What's your take on what's happened so far and the journey to getting this pricing metric? Thank you, David, for having me. I think what has happened so far is that we can now say that we are now dealing with a fully deregulated market for petrol, for fuel, or PMS, Premium Motor Spirit. So what we're now dealing with is a situation where the market prices could change at regular intervals, depending on what happens to crude price and what happens to plat. And as it relates to the engagement between Dangote Refinery and the Independent Petroleum Marketers Association of Nigeria, ultimately NMPC has said that petroleum marketing companies can actually now order their PMS or fuel from Dangote and are no longer acting as intermediary. They are no longer acting as the sole off-taker from Dangote Refinery, which means the subsidy area is now completely behind us. So Independent Marketers will now go to Dangote and agree prices. I believe Dangote will come up with prices at regular intervals based on what happens to plat and what happens to crude price. And the key thing for them is what volume is Dangote currently producing, what is the current national demand, actual national demand, not the inflated national demand. Of course, national demand we suspected to moderate with the increase in price. So what is that volume? And then can Dangote meet that volume in the interim? Of course, we all know that Dangote Refinery is a new refinery and therefore will be scaling up refining capacity over time. So they may not have attained the full refining capacity. So there will be some level of allocation now that, I mean, what goes to the Independent Marketers and what goes to NMPC and other traders. Exactly. And if you were to also, from your own reading now, give where a good peg would be, for example, the Lagos Chamber of Commerce and Industry is proposing a peg of about 1,000 naira to the US dollar as the exchange rate that should be used. But when we look at how this trickles down into the sort of inflation trajectory, we're expecting inflation to moderate even further in this fourth quarter of the year. But where lies that fate right now? Do you see us even going out of the initial forecast into higher inflationary environment on the back of this price shock? Yes, David, I expect that the inflation figure for September would reverse the two-month decline we saw in July and August. We saw a material increase in fare price in September towards the end of August and in September. And if you look at the data collection period, it costs, I think it ends at the middle of the month. So the second half of, the first half of September would have captured even the new increase in fare prices. And of course we know that the trickle-down effect of increasing fare prices, increasing transport costs, increasing general commodity prices, and we're also seeing a further depletion of local currencies. So these factors will flush into the inflation figures. I expect the inflation figures to go up, to move up in September. It may not be as drastic as most people expect because we are still in the harvest season. So the increase in farm produce in the month of September may to some extent dampen the expected increase in all-item inflation. But I think we should see a reversal of the decline we saw in July and August. While we continue to paint the picture of what a fully deregulated market looks like, for you, what should be the likely outcome from talks between Dangoterra and then the marketers by tomorrow? And if you were to give us an insight, your own take on where we'll see the petrol price settle? Well, the petrol price, let me start from that angle, excuse me. We should expect that the prices will adjust regularly. I think if... Arrange. Yeah. You know, David, you know the reality is that it's difficult for you to talk about the range, and I'll tell you why. There are two variables that are moving at the same time. One is international prices of crude and international prices of flat. Second aspect is the exchange rate. So you have to hold one constant to give an estimate of what you expect prices to trade. If, for instance, we are going to keep exchange rate constant and we say the exchange rate is going to stay in the region of 1,600 to 1,650 or 1,680, then you can hazard a guess what kind of flotation we expect in crude prices. But even crude prices can flotate widely. In the past three weeks we've seen crude prices move up from as low as $70 to as high as $80, over a $10 increase because of the flare-up of tension between Israel and Hezbollah. So, and we should expect that if that's moderate, if that crisis in the Middle East is moderate, we should see a decline in crude price. But if we can hazard a guess on what the range would be, these factors are... It's quite difficult to predict at this moment. Johnson would have to leave the conversation here for now. That was Johnson Chukwu, the Chief Executive Officer of Kari Asset Management.

Dangote Refinery and petroleum marketers in Nigeria will hold talks on Tuesday and Wednesday over product pricing metrics. Can Nigeria still achieve its inflation target amid recent petrol price shocks? Johnson Chukwu, CEO of Cowry Asset Management joins CNBC Africa for more on this and reactions to petrol pricing metrics so far.

Dangote Refinery, marketers to meet over petrol pricing metrics

Dangote Refinery and petroleum marketers in Nigeria will hold talks on Tuesday and Wednesday over product pricing metrics. Can Nigeria still achieve its inflation target amid recent petrol price shocks? 

Dangote Refinery, marketers to meet over petrol pricing metrics

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