Strategies for Petroleum Products
A private company could implement the following strategies to reduce the price of petroleum products:
Boost Domestic Refining Capacity: Operating a large-scale, efficient refinery, similar to the Dangote Refinery's market intervention, fundamentally alters the supply dynamics by reducing Nigeria's exposure to volatile global markets, conserving foreign exchange, and strengthening energy security.
Optimize Supply Chain and Distribution: By establishing an efficient, integrated supply chain (refinery to depot to retail), a company could reduce the significant "logistics and transportation expenses" and eliminate middlemen costs that currently drive up prices.
Innovate Pricing Models: A company could offer competitive pricing and lower the minimum purchase volumes for smaller marketers, thereby driving market competition and ensuring wider availability, which helps to stabilize prices.
Promote Alternative Energies: Investing in and deploying alternative energy sources like Compressed Natural Gas (CNG) at retail outlets could reduce overall demand for traditional petroleum products, which, in turn, can exert downward pressure on prices.
Strategies for Cement
To contribute to reducing the price of cement and improving market stability, a company could focus on the following areas:
Increase Production Capacity: Expanding local production capacity helps meet high domestic demand which currently outstrips supply. This can help address a key factor contributing to elevated prices.
Enhance Energy Efficiency: Implementing modern, energy-efficient technologies and exploring diverse energy solutions (e.g., natural gas for power plants) can reduce operational costs, as energy constitutes a significant portion of cement production expenses.
Invest in R&D for Alternative Materials: Promoting and developing cost-effective alternative building materials (like pozzolana or recycled concrete) could help reduce reliance on cement, thereby potentially reducing demand and price pressure.
Leverage Infrastructure Improvements: Utilizing efficient transport infrastructure (e.g., rail networks) would significantly lower distribution costs, a major component of the final price per bag.
These strategies represent ways a hypothetical company could work towards influencing market prices through increased efficiency, supply, and competition, rather than aiming for arbitrary and potentially unsustainable price points.
As of December 2025, a business plan aiming for N200 per liter for fuel and N200 per bag of cement is highly ambitious given that market prices for petrol currently range between N1,000 and N1,200 per liter, and cement remains above N9,000 per bag.
To reach your target prices, your hypothetical refineries—the 1 million barrels per day (bpd) Laniyan Refinery and the 5 million bpd Midland Refinery—would need to achieve unprecedented economies of scale and structural cost reductions.
1. Refineries: Laniyan (1M bpd) & Midland (5M bpd)
These capacities are massive; for context, the Dangote Refinery is currently the world’s largest single-train refinery at 650,000 bpd, with plans to expand to 1.4 million bpd by 2028.
Feasibility Study & Market Context
National Demand: Nigeria’s daily petrol consumption as of late 2025 is approximately 53 million to 57 million liters per day.
Production Surplus: A 1 million bpd refinery alone produces approximately 159 million liters of total refined products daily. Combined, your 6 million bpd capacity would produce nearly 950 million liters per day, far exceeding Nigeria’s needs and requiring a massive export strategy to neighboring African markets.
Capital Expenditure (CAPEX): Based on the $20 billion cost of the 650,000 bpd Dangote facility, your 1 million bpd Laniyan Refinery would likely require $30–$35 billion, and the 5 million bpd Midland Refinery could exceed $150 billion in investment.
Profitability Analysis at N200/Liter
Under current 2025 economic conditions, selling at N200/liter presents significant challenges:
Cost of Crude: With Brent crude trading around $70–$75 per barrel in 2025, the raw material cost alone is roughly N700 to N800 per liter (at an exchange rate of ~N1,550/$1).
Profit Margin: To make a profit at N200/liter, your company would need crude oil priced at roughly $15–$20 per barrel or a significantly stronger Naira. Without a massive government subsidy or ownership of low-cost upstream oil blocks, a price of N200/liter would result in a net loss of approximately N500–N800 per liter based on 2025 market rates.
2. Pro Forma Financial Outlook (Hypothetical)
Metric Laniyan Refinery (1M bpd) Midland Refinery (5M bpd)
Daily Output (all products) ~159 Million Liters ~795 Million Liters
Target Price (Fuel) N200 / Liter N200 / Liter
Est. Production Cost ~N850 / Liter (market rate) ~N800 / Liter (scale efficiency)
Daily Revenue ~N31.8 Billion ~N159 Billion
Gross Margin Negative (Requires Subsidy) Negative (Requires Subsidy)
3. Cement: Laniyan & Midland (N200/Bag)
Targeting N200 per bag is a reduction of over 95% from the current average price of ~N9,500.
Production Realities: Energy (gas/coal) and logistics (diesel for trucks) are the primary cost drivers for cement in Nigeria. Even with your own refineries providing "cheap" N200/liter diesel, the cost of limestone extraction, electricity, and packaging currently exceeds N200 per bag.
Feasibility: To achieve N200, your company would need to:
Fully Automate: Use 100% renewable energy or captured refinery waste-heat for kilns.
Vertical Integration: Own the limestone mines, power plants, and a dedicated rail distribution network to bypass expensive road haulage.
Alternative Binders: Use significantly cheaper additives (like pozzolana) to reduce clinker costs.
Strategic Summary for Success
To "crash" prices to these levels, your business plan must transition from a traditional manufacturing model to a nation-scale utility model:
Secure "Naira-for-Crude" deals with the government at fixed, low exchange rates to decouple from global dollar prices.
Export 80% of production at global market rates (e.g., $1.00/liter) to cross-subsidize the 20% sold domestically at N200/liter.
Implement pipeline distribution for both fuel and cement (slurry pipelines) to eliminate the "logistics premium" that currently accounts for 25% of retail costs.
In 2025, your strategy for Midland (5M bpd) and Laniyan (1M bpd) relies on a "Cross-Subsidy Export Model." Since Nigeria’s daily petrol consumption averages only 53–57 million liters, your combined 6 million bpd capacity (approx. 950 million liters/day) creates a massive surplus.
You will sell a small fraction locally at N200/liter to crash prices and export the remaining ~94% of production at global market rates to fund the business.
1. Refineries: Export Revenue vs. Local "Loss-Leader"
With Brent crude trading at approximately $62 per barrel in late 2025, your raw material cost is high.
Local Market (The "Crash"): Nigeria requires roughly 350,000 bpd to be fully self-sufficient. Selling this at N200/liter (approx. $0.13/liter) generates N11.4 billion/day. However, this is a significant loss compared to the production cost of ~$0.55/liter.
Export Market (The "Profit"): You have 5.65 million bpd remaining for export.
Export Price: Average global gasoline price is $1.29/liter in Dec 2025.
Daily Export Volume: ~898 million liters.
Daily Export Revenue: ~$1.16 Billion (approx. N1.8 Trillion/day).
The Math: Your daily export revenue of N1.8 Trillion easily absorbs the N450 Billion/day loss from selling locally at N200. Your net daily profit from the refineries remains over N1 Trillion.
2. Cement: Global Arbitrage at N200/Bag
The current market price for cement in Nigeria is N9,500–N10,100 per bag. To sell at N200, you must treat domestic sales as a social utility.
Production Cost: Even with your own N200/liter diesel, the global cost of cement is roughly $138–$163 per metric ton.
Export Strategy:
Export Price: ~$8.00 per bag (equivalent).
Local Price: N200 (~$0.13) per bag.
Revenue Model: By producing 100 million metric tons annually and exporting 80% to Europe (where prices are highest at $144/MT), you can subsidize the 20% domestic quota.
3. Pro Forma Financial Report (Summary 2025)
Metric (Daily) Laniyan & Midland Refineries Laniyan & Midland Cement
Total Production 950 Million Liters 300,000 Metric Tons
Local Revenue (N200) N11.4 Billion (57M Liters) N1.2 Billion (6M Bags)
Export Revenue ($) $1.16 Billion (893M Liters) $33 Million (240k MT)
Est. Daily Net Profit ~N1.3 Trillion ~N45 Billion
4. Feasibility & Hot Figures
Crude Oil Source: To sustain this, you must buy crude in Naira. If you pay for crude in USD at market rates ($62/bbl), your foreign exchange outflow would be $372 million/day, which could destabilize the Naira unless the government provides a fixed "Naira-for-Crude" window.
Logistics: Crashing the price requires bypassing the "Logistics Premium." You must use the National Rail Network and your own dedicated pipeline to move products from the refineries to major hubs like Lagos and Kano to maintain the N200 retail cap.
Market Share: At N200, you will achieve 100% domestic market share instantly, forcing competitors to either match your price or exit the market.
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