The Nigerian National Petroleum Company Limited (NNPC) has decided to bring to a halt its exclusive deal with Dangote Refinery, giving other marketers the chance to purchase petrol directly from the refinery.
Hence, the implication of this only means that marketers can negotiate prices directly with the Dangote refinery, with NNPC off the table as the middleman. This aligns with current practices in the deregulated petroleum market, where refineries can sell products directly to marketers on a “willing buyer, willing seller” basis.
The Breakdown of the New Development
Devakumar Edwin, Vice president at Dangote Industries, stated in September that the refinery, which processes 650,000 barrels of crude oil daily, had started producing petrol and that the NNPC would be the sole buyer of the refinery’s petrol.
However, in a response to earlier claims that NNPC was undermining Dangote Refinery, NNPC clarified that it was not the only buyer of the refinery’s products. It said Dangote Refinery was free to sell its petrol to any marketer.
It explained further that following the current practice for all deregulated products like diesel, aviation fuel, kerosene, etc, the domestic refinery was free to sell directly to any marketer on a “willing buyer, willing seller” basis.
However, on September 15, the NNPC started loading petrol from Dangote Refinery and while some prominent marketers were eventually allowed to lift petrol from the refinery under a desk with the NNPC, independent marketers were completely left out.
To fix this, on 26th Sept, the House of Representatives urged the federal government to ensure that independent marketers could also buy petrol directly from Dangote Refinery. The House also encouraged Dangote to establish storage facilities across the geo-political zones of Nigeria to ease access to petrol for the public.
Instantly, this sparked a motion of urgent public importance that was moved on Thursday by Oboku Oforji (PDP, Bayelsa).
Read Also: Nigeria government begins Naira-for-crude sales with dangote refinery
He addressed the fact that the exclusion of independent marketers threatened competition. He also explained that competition is very vital in the sector as competition is important for lowering costs, and some marketers might resort to importing fuel if they cannot buy from Dangote Refinery. He thoroughly criticized the actions of the NNPC for being exclusive buyers and accused them of mismanagement of Nigeria’s crude oil.
In his words, “NNPCL and the major marketers being the exclusive off-takers spells monopoly, which is tantamount to greed. This is the same NNPC Ltd that has failed to manage our crude and refineries for decades.”
Implications of this Development
Petrol subsidies would end as NNPC isn’t there to cover the difference between Dangote’s selling price and the marketer’s purchase price. However, marketers will now buy petrol at market prices and add their margin, which could lead to an increase in the price of petrol.
What You Should Know
The NNPC had claimed in September that it was buying petrol from Dangote Refinery at N898.78 per liter and selling to marketers at N765.99 per liter, shouldering a subsidy of almost N133 per liter.
The NNPC lifted about 103M liters of petrol from Dangote Refinery between September 15 and 30. The refinery was able to load 2,207 of the 3,621 trucks sent to it within the period under review.
The vehicles carried just 102,973,025 liters of the planned 400,000,000 liters of petrol earmarked to be lifted from the refinery at 25M liters daily.
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