Where does your ₦1,360 a litre go? We broke down the price of petrol in Lagos

Most of us only see one number: the price on the pump. This week it was ₦1,360 a litre at NNPC and MRS stations in Lagos, according to checks by Vanguard on Tuesday 3 November. Mobil was a little cheaper at ₦1,349 and some independent stations charged up to ₦1,370.

We wanted to know where that money goes. So we took the figures that are published every day and worked through them, step by step. This is our own arithmetic on public data, not a figure from any company or regulator.

Step 1: the crude oil

Petrol starts as crude oil, which is priced in dollars per barrel. Brent, the world benchmark, settled at $103.60 a barrel on Tuesday, Reuters reported, its lowest close since 7 October.

A barrel holds 158.987 litres. So one litre of crude cost about $0.65.

To turn that into naira we used the official rate. The latest published NFEM figure on Wednesday morning was ₦1,346.43 to the dollar, according to Techeconomy and Vanguard, both citing the 3 November publication.

That puts the crude in one litre at about ₦877. Against a ₦1,360 pump price, crude accounts for about 64 per cent, or nearly two naira in every three.

Step 2: from crude to the refinery gate

The Dangote refinery set a fixed gantry price of ₦1,300 a litre from midnight on 3 November, Legit.ng reported. Vanguard's depot checks the same day had Dangote at ₦1,303.

The gap between ₦877 of crude and a ₦1,300 gantry price is about ₦423 a litre, or roughly 31 per cent of the pump price.

That gap pays for a lot: shipping crude to the refinery, refining it, the extra value petrol commands over crude on world markets, financing, and the refiner's profit. Dangote does not publish a breakdown, so we cannot split this layer further. What we can say is that it is the second biggest piece by far.

Imported petrol gives a useful check. Marketers' group MEMAN put the landing cost of imported petrol at ₦1,239.92 a litre on 30 October, Legit.ng reported. That is the cost of a litre arriving at a Nigerian port, before any margin. We explain landing cost here.

Step 3: the depot

Independent depots in Lagos sold petrol at ₦1,290 to ₦1,305 a litre on Tuesday. Legit.ng had NIPCO at ₦1,290 and A.A. Rano at ₦1,295. Vanguard had A.A. Rano at ₦1,295, NIPCO at ₦1,305 and MRS at ₦1,310.

The two outlets give different NIPCO prices for the same day. Depot prices change during the day, which may explain it.

Step 4: from the depot to your tank

From a depot price of about ₦1,290 to ₦1,305 to a pump price of ₦1,360, the last step adds about ₦55 to ₦70 a litre. That covers trucking, the filling station's running costs, levies and the marketer's margin.

It is the smallest slice, about 4 to 5 per cent of what you pay in Lagos. It is larger in the north and east, where trucks travel further.

The picture in one line

Of every ₦1,360 litre in Lagos this week, about ₦877 was crude oil, about ₦423 was refining and the refinery's side of the chain, and about ₦60 was getting it from the depot to the pump.

What Wednesday's oil fall changes

Brent fell 8.7 per cent on Wednesday to settle at $94.62, the lowest since 31 August, after the US election raised hopes of an end to the Iran war. Reuters said both benchmarks fell more than 8 per cent.

At the same exchange rate, the crude in a litre drops from about ₦877 to about ₦801. That is about ₦76 a litre less.

Two simple rules come out of this arithmetic:

• Every $1 change in Brent moves the crude cost of a litre by about ₦8.50.
• Every ₦10 change in the naira rate moves it by about ₦6.50, at today's oil price.

Why the pump will not fall by ₦76 tomorrow

Our sums show the direction, not the speed. Refiners buy crude weeks before they sell petrol, so a cargo bought at $110 is still being sold today. Recent Dangote price changes have been linked to EBOB, a European petrol benchmark, rather than directly to crude, Naija News reported on 2 November. Part of the refinery's crude is also bought in naira under the government's crude-for-naira arrangement, which our dollar sums do not capture.

Not all of a barrel becomes petrol, either. A refinery also makes diesel, aviation fuel and other products from the same barrel, so the true crude cost of a litre of petrol is not exactly the same as a litre of crude. Treat our figures as a guide to the size of each layer, not an exact bill.

Prices can also move the other way. Mukesh Sahdev of the consultancy XAnalysts told Reuters that inventories in big consuming countries are near 15-year lows. Asked if prices would stay lower, he said: "The short answer is no."

What it means for you

Two things decide most of what you pay for petrol: the world oil price and the naira. Together they set about two thirds of the pump price. When both move in your favour, as oil did this week, pump prices should ease, but usually over weeks, not days.

The part filling stations control is small. If your local station is charging far more than ₦60 to ₦70 above the depot prices reported in the news, it is fair to ask why, or to buy elsewhere.