This implies that marketers can now directly negotiate prices with Dangote Refinery and that NNPC will no longer be the only offtaker.
Report as of today is that the Nigerian National Petroleum Company Limited (NNPC) is terminating its exclusive purchase agreement with Dangote Refinery, opening up the market for other marketers to buy petrol directly from the refinery.This implies that marketers can now directly negotiate prices with Dangote Refinery and that NNPC will no longer be the only offtaker.
This move is in line with the procedures that are currently in place for completely deregulated products, which allow refineries to sell directly to marketers on the basis of willing buyers and sellers.In early September, Dangote Industries Limited vice president Devakumar Edwin announced that the refinery’s 650,000 barrels per day of petrol processing had started.
VP of Gas and Oil at Dangote Industries Limited, Devakumar Edwin [PHOTO CREDIT @Dangote Industries Limited]
However, the NNPC refuted a claim that the Dangote Refinery Limited was being weakened by the company’s actions at the time by stating that it was not the only party that purchased all of the refinery’s products. It stated that any marketer could purchase petrol from the refinery at no cost.The NNPC clarified that, as is currently the case for all fully deregulated products like diesel, aviation fuel and kerosene, the Dangote Refinery and any other domestic refinery were free to sell directly to any marketer on a willing buyer, willing seller basis.However, the NNPC started loading petrol from the Dangote Refinery on 15 September.Independent marketers were not allowed to remove the product from the refinery, even though some large petroleum marketers were later allowed to do so under a contract with NNPC Ltd.
NNPC Steps Down As Middleman In The Purchase Of Petrol From Dangote Refinery
The House of Representatives demanded on September 26 that the federal government order NNPC Ltd. and Dangote Refinery to permit independent marketers to purchase petrol straight from the refinery.In order to facilitate public access to petroleum products, the lower house also urged the management of Dangote Refinery to construct, purchase, or collaborate with others to establish tank farms or depots throughout the nation’s geopolitical zones.Oboku Oforji (PDP, Bayelsa) moved a motion of urgent public importance on Thursday, which was followed by this call.Mr. Oforji, who made the motion, argued that the industry’s competition was at risk due to the exclusion of independent marketers.He added that some marketers might turn to importing products in order to survive in the market and that competition is necessary for cost reduction.
Monopoly is a result of NNPCL and the big marketers being the only off-takers, which is equivalent to greed. The lawmaker stated at the time, “This is the same NNPC Ltd that has failed to manage our crude and refineries for decades.”According to people with knowledge of the situation, NNPC will soon step down as the only off-taker, enabling other marketers to buy petrol directly from Dangote Refinery at the going rate. This move is expected to increase competition and possibly stabilise supply chains. PREMIUM TIMES was informed of this development.
In September, the NNPC asserted that it was purchasing gasoline from Dangote Refiner at a cost of N898.78 per litre and reselling it to retailers for N765.99 per litre, thereby receiving a nearly N133 per litre subsidy.Between 15 September and 30, the NNPC removed approximately 103 million litres of petrol from the Dangote Refinery. During the review period, the refinery managed to load 2,207 out of the 3,621 trucks that were sent to it.
Only 102,973,025 litres of the 400,000,000 litres of gasoline that were supposed to be extracted from the refinery at a rate of 25 million litres per day were carried by the vehicles. That equated to a mere 26% performance, according to documents obtained by PREMIUM TIMES.
Resulting Effects
With NNPC no longer serving as the only off-taker for Dangote petrol, the market is becoming much more liberalised and marketers are now able to purchase goods directly from Dangote Refinery or other suppliers.Subsidies will end when NNPC stops paying the difference between Dangote’s selling price and the price to marketers. Now, marketers will purchase directly from Dangote and add their own differential to the price they sell at, potentially raising the price of the product.Additionally, marketers are no longer limited to Dangote as a source for products, which encourages competition and may stabilise supply chains.