The Nigerian National Petroleum Company Limited (NNPC) is terminating its exclusive purchase agreement with Dangote Refinery, allowing other marketers to buy petrol directly from the refinery. This means that NNPC will no longer be the sole off-taker, and marketers can now negotiate prices directly with Dangote Refinery.
This approach is consistent with current procedures for fully deregulated products, which allow refineries to sell directly to marketers on a willing buyer/willing seller basis.
Earlier in September, Devakumar Edwin, vice president of Dangote Industries Limited, said that the 650,000 barrels per day Dangote Refinery had begun processing petrol.
Mr Edwin explained that NNPC Limited would buy its product exclusively.
Dangote Refinery. However, in response to a statement claiming that the Dangote Refinery Limited was being undercut by the company’s actions at the time, the NNPC stated that it was not the exclusive offtaker of all Dangote refinery goods. It said that the refinery was free to sell its gasoline to any marketer.
The NNPC stated that the Dangote Refinery and any other domestic refinery could sell directly to any marketer on a willing buyer, willing seller basis, as is the present practice for all fully deregulated goods such as diesel, aviation fuel, and kerosene. However, on September 15, the NNPC began loading petroleum from the Dangote Refinery.
Although some major petroleum marketers were later reportedly approved to lift the product from the refinery under an agreement with NNPC Ltd., independent marketers remained excluded.
On 26 September, the House of Representatives called on the federal government to mandate the NNPC Ltd. and Dangote Refinery to allow independent marketers to lift petrol directly from the refinery.
The lower chamber also urged the management of Dangote Refinery to build, acquire, or partner to establish tank farms or depots across the geopolitical zones of the country, to ease access to petroleum products for the public.
This call followed a motion of urgent public importance moved on Thursday by Oboku Oforji (PDP, Bayelsa). Moving the motion, Mr Oforji explained that the exclusion of independent marketers threatened competition in the sector. He noted that competition is essential for reducing costs, adding that some marketers may resort to importing products to survive in the market.
“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,” the lawmaker said at the time.
Those familiar with the matter told PREMIUM TIMES that NNPC is now set to withdraw as the sole off-taker to allow other marketers to directly purchase petrol from Dangote Refinery at the prevailing market price, promoting competition and potentially stabilising supply chains.
Femi Soneye, the spokesperson for the NNPC, is not immediately available to comment for this story but a top official of the company confirmed the development to PREMIUM TIMES Monday morning.
“Yes, it is true,” the official said. “We can no longer continue to bear that burden.”
The NNPC had claimed in September that it was buying petrol from Dangote Refiner at N898.78 per litre and selling to marketers at N765.99 per litre, shouldering a subsidy of almost N133 per litre.
The NNPC lifted about 103 million litres of petrol from Dangote Refinery between September 15 and 30. The refinery was able to load 2,207 of 3,621 trucks sent to it within the period under review.
The vehicles carried just 102,973,025 litres of the planned 400,000,000 litres of gasoline earmarked to be lifted from the refinery at 25 million litres per day. That translated to just 26 percent performance.
Implications
The NNPC’s removal as the sole off-taker of Dangote fuel marks a significant step toward market liberalization, allowing marketers to purchase products directly from Dangote Refinery or other suppliers.
Subsidies will expire when the NNPC no longer pays the difference between Dangote’s selling price and the amount paid by marketers. Marketers will now purchase directly from Dangote and sell at cost plus their own margin, potentially upping the product’s price.
Marketers can now buy products from anyone, not only Dangote, which fosters competition and has the potential to stabilize supply chains.
