The Nigerian National Petroleum Company Limited (NNPC) and Dangote Petroleum Refinery are nearing a final agreement on the sale of crude oil from NNPC to Dangote Refinery in naira and the subsequent buy-back of refined petroleum products from the $20 billion plant in naira.
The Vice President of Oil and Gas at Dangote Industries Limited, Devakumar Edwin, declared on Thursday during a space session on X, that parties in the deal may conclude discussions by next week.
The Dangote official also mentioned that oil marketers have continued to boycott the diesel and aviation fuel produced by the Lekki-based plant. He added that these marketers have reported the refinery’s low-priced diesel to President Bola Tinubu, claiming that it is detrimental to their businesses.
Edwin also mentioned that oil marketers have continued to boycott the diesel and aviation fuel produced by the Lekki-based plant. He emphasized that these marketers have reported the refinery’s low-priced diesel to President Bola Tinubu, claiming that it is detrimental to their businesses.
Edwin further revealed that NNPC had demanded to oversee the production of refined products at the Dangote refinery, based on the fact that the national oil company would supply crude to the plant.
In August 2024, reports reveal that the Federal Government disclosed that the sales of crude oil to Dangote refinery and other local refineries would commence on October 1, 2024.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, announced this during a meeting with the Implementation Committee established to implement the decision.
“The Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, today led the Implementation Committee meeting on the transition to crude oil sales in naira.
“The meeting reviewed progress on key initiatives, including the upcoming commencement of naira payments for crude oil sales to the Dangote Refinery starting October 1, 2024,” the finance ministry had stated in a post on its official X handle in August.
It also stated that the Executive Chairman of the Federal Inland Revenue Service, Dr Zacch Adedeji, and the Chairman of the Technical Sub-Committee reported that “The first PMS delivery from Dangote is expected next month (September) under existing agreements.”
The Vice President at Dangote Industries, Edwin, while providing updates on this during the space session on Thursday, noted that discussions were advancing on naira transactions for crude purchase and product buy-back.
Transactions in naira
Edwin said, “Now we are still discussing with the government to give us the crude in naira. The discussions have been going on. It has not yet been concluded. When we buy the crude from them in naira, they will take the products back from us in naira, that’s where we are. We are still in discussions.
“So now whatever we are producing, they will buy back from us. In fact, NNPC has told us they will have a team of six to 10 people permanently stationed inside our refinery. They even told us we should give them office space because they are going to give the crude.
“They are going to monitor the production and then they will buy it back in naira. So, this is where we are, and we are waiting for the conclusion of the discussions. Hopefully, by next week, if it gets concluded, we can kick off.”
Edwin stated that the President of Dangote Group, Alhaji Aliko Dangote, was the one who insisted on dealing with the Nigerian government in naira because of the foreign exchange challenges confronting the country.
“When it came to petrol, we told the Presidency that if we were going to continue to import crude, our cost of production would be high and of course, our quality is very high. So, we will continue to export and manage the business. Then they sat with us and said, ‘Okay, we will try and give you crude allocation and you please produce and sell to us the products which you are producing out of the crude’. We said, yes.
“Then they said, can you sell it in naira? We said, no, we are a free zone company. We will be normally selling in dollars. They said, no, the country is in acute scarcity of dollars. So, please, we will supply the crude to you in naira. Sell the product to us in naira. Though internally, including me, some of us objected to the idea. My president clearly said we are going to accept this because the country is badly in need of foreign exchange.
“The currency value is dropping every day. Yes, I know I am going to take a loss because by the time we sell it in naira and convert it to dollars, (we are not even getting the dollars). By the time we convert, the currency may become weaker. So, we know he (Dangote) is going to lose. He said, I’m willing to take the loss in the interest of the country. I don’t mind, but the country is in bad shape. Somebody has to take certain risks. I’m willing to face the loss to whatever extent it is. So, that is how we agreed,” Edwin explained.
Marketers boycott refinery
The Dangote official also disclosed that petroleum product importers and marketers reported the Dangote refinery to President Tinubu after the refinery lowered diesel prices.
He stated that over 95% of petroleum product importers in Nigeria are not purchasing products from the Dangote refinery. The refinery struggles to sell approximately 29 tankers of diesel per day due to low patronage from local petroleum product importers.
As a result of poor local patronage, the refinery, he said, exports most of its diesel and aviation fuel.
He said the Dangote refinery has imported around 57 shiploads of crude, as local supply from the NNPC remains limited.
“Petroleum product marketers in Nigeria have written to President Bola Tinubu, complaining that the refinery’s local diesel prices, which have dropped from N1,200 to N1,000 and now to N900 per litre, are negatively impacting their businesses,” Edwin stated.
However, he maintained that despite the challenges, 44 per cent of the refinery’s petrol production capacity is sufficient to meet Nigeria’s local demand.
He said, “You can come to the refinery and see, I can load 2,900 tankers daily. The whole country is empty, not one tanker. Whereas, where I can load 2,900 a day, not one tanker is being loaded. So they want to continue to import. So they are just blockading us.
“Number two, they (marketers) even wrote to His Excellency, the President. I have a copy I can share with all of you, where they wrote to the President, ‘Oh, Dangote Group came in and started producing diesel. They dropped the price the first time, they dropped the price the second time, and it is disturbing us.’
“So the interest of the refinery was to produce locally and try to supply at a reasonable price. So, we gave a reasonable price, we dropped and then we dropped the second time and they wrote to His Excellency, the President saying we are dropping the price and disturbing the market. So, they refused to buy from us.”
Currently, the official revealed that around 29 tankers are lifting fuel from the depot of other importers daily, neglecting local production.
Earlier, while speaking on the Brekete Family live show on Monday, Edwin said the Dangote petrol will be exported if the NNPC and other petroleum dealers in the country refuse to patronise it.
Asked if the petrol would be sold locally, Edwin replied, “There has been a kind of a blockade from lifting our products within the country. The traders have been trying to blockade, and so now we have been exporting our petroleum products. PMS, we are ready to pump in as much as possible to the country.
“But if the traders or NNPC are not buying the product we will end up exporting the PMS as we are doing with the aviation jet and diesel,” he declared.
Edwin expressed surprise that the company started facing different challenges it never expected when the refinery was set to commence operations.
He recalled that the philosophy initially was to add value to the raw materials available in the country, regretting that Nigeria is still exporting crude and importing refined petroleum products after over three decades.
Despite having a gantry that can load 2,900 tankers per day, Edwin disclosed that the refinery has not loaded up to five per cent of the gantry’s capacity owing to low local patronage.
“Go and see our product gantry, we can load 86 tankers at any given time. We can load 2,900 tankers of petroleum products every day, but we are not even loading five per cent, because those who are interested in the trading business, feel that probably this local production is going to affect their established interest, so they are not allowing our products to be sold locally. They are not coming to lift our products. So, what are we doing? We are exporting the products.
“Yes, the refinery can survive, we can import the crude, we can export petroleum products, and we can survive. But is that why he invested in the refinery?” he queried.
NNPC tackles lawmaker
In another development, the spokesperson of NNPC Olufemi Soneye, tackled Dr Muiz Banire, SAN, and former Commissioner of Transport and Environment, Lagos State, for contending in his column in a newspaper publication (not The PUNCH) that NNPC is the black hole of Nigeria.
Olufemi Soneye, the spokesperson for NNPC, in another development responded to Dr. Muiz Banire, SAN, and former Lagos State Commissioner of Transport and Environment, for his assertion that NNPC is the black hole of Nigeria in a newspaper publication.
“At this critical intersection, the task for all well-meaning Nigerians should be how to find lasting solutions to the mischiefs in the oil sector and not to look for scapegoats, as Dr Banire has done.
“According to Banire, Nigeria has been experiencing fuel scarcity since 1973 on the back of fuel subsidy and the NNPC Ltd is responsible for it. The assertion that the NNPC is responsible for this state of affairs is moot. The policy of fuel subsidy is not the preserve of the NNPC.
“Various administrations over the years have thought it wise to subsidize the cost of petroleum products for citizens. They came up with different methods of doing that. The role of NNPC Ltd has been to implement the policy as decided by the government. At a point when the various administrations felt that the fuel subsidy policy had become a burden that should be done away with, they made it known. NNPC Ltd, as the national oil company, implemented it.
“This was the case in 2012 when the nation went up in protest against the government’s decision to remove fuel subsidies. The same scenario repeated itself in 2019 when the then-administration came up with the policy to remove fuel subsidies. NNPC Ltd is neither responsible for the policy of fuel subsidy nor its removal,” Soneye said.
This article was written by Tamaraebiju Jide, a student at Elizade University
