Dangote petrol price rise in dilemma

The Chairman of Dangote Industries Limited, Aliko Dangote, has attributed the high price of petrol in Nigeria partly to the continued smuggling of the commodity to neighboring countries where it is sold at much higher prices.

Dangote said petrol prices in neighboring countries are between 30 and 50 per cent higher than in Nigeria, arguing that the price difference creates a strong financial incentive for traders to move petrol out of the country.

The oil tycoon said this in an interview aired on Tuesday on Arise TV, speaking about the price of petrol and the availability of the product in the context of the ongoing crisis in the Middle East.

Explaining why Nigerians might perceive petrol as expensive despite the country producing it domestically, Dangote said the price cannot be considered separately from prices in neighboring countries.

“You know, dear is relative. In the sense that today, perhaps, many of them, there is also ignorance. What they have to do is ask, what is the price of the neighbor?”

He said the continued movement of Nigerian petrol across borders was partly driven by the significant difference between domestic prices and those obtainable in neighboring countries.

“I don’t know if you know that there is still a lot of smuggling of the same gasoline we produce to neighboring countries.”

The price gap means that petrol purchased in Nigeria can potentially be resold across the border at a substantial premium. Dangote says this creates an incentive for smugglers to divert petrol destined for the Nigerian market instead of selling it domestically.

“Because neighboring countries are 30 to 50 percent more expensive than Nigeria. So it’s not quite the same.”

Dangote specifically cited Niger Republic, where he said petrol is sold at 20 to 25 percent the price of Nigeria.

He used the example to illustrate why cross-border trade could be financially attractive, particularly when the price difference is large enough to provide an immediate return on the goods.

“And people can now go and ask, okay, okay, what is the price, even now at N1, 350? Okay, the price in Niger is 20 to 25% more than Nigeria,” he said.

He wondered what other legitimate businesses could provide such an immediate return.

“So, what business will you do that will get you an instant 25% return?” he asked.

Dangote further explained how petrol destined for domestic distribution could be diverted to the border to be sold to buyers in neighboring countries.

“So that means, yeah, get the [petrol]go and take him across the border. Pretend you take it to Sokoto, go take it to Ilela and sell it,” he said.