The Nigerian National Petroleum Company Limited (NNPC) is ending its exclusive purchase agreement with Dangote Refinery, opening up the market for oth
The Nigerian National Petroleum Company Limited (NNPC) is ending its exclusive purchase agreement with Dangote Refinery, opening up the market for other marketers to buy petrol directly from the refinery. This means NNPC will no longer be the sole off-taker, and marketers can now negotiate prices directly with Dangote Refinery.
This development aligns with the current practices for fully deregulated products, where refineries can sell directly to marketers on a willing buyer, willing seller basis.
Earlier in September, Devakumar Edwin, vice president at Dangote Industries Limited, said the 650,000 barrels per day Dangote Refinery has begun the processing of petrol.
Edwin explained that NNPC Limited would buy its product exclusively.
But the NNPC, in reaction to a statement that the Dangote Refinery Limited is being undermined by actions of the company at the time, said it was not the sole offtaker of all products from the Dangote Refinery. It said the refinery was free to sell its petrol to any marketer.
The NNPC explained that the Dangote Refinery and any other domestic refinery were free to sell directly to any marketer on a willing buyer, willing seller basis, which is the current practice for all fully deregulated products such as diesel, aviation fuel and kerosene.
But on 15 September, the NNPC began loading petrol 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 geo-political 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 Honourable Oboku Oforji. Moving the motion, 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 revealed that all 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.
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 petrol earmarked to be lifted from the refinery at 25 million litres per day. That translated to just 26 per cent performance.
NNPC’s withdrawal as the sole off-taker of Dangote petrol marks a significant shift towards complete liberalisation of the market, allowing marketers to source products directly from Dangote Refinery or other suppliers.
With NNPC no longer covering the differential between Dangote’s selling price and the price to marketers, subsidies will cease to exist. Marketers will now buy directly from Dangote and sell at cost price, adding their own differential, which may lead to a hike in the product’s price.
Also, marketers can now source products from anywhere, not just Dangote, promoting competition and potentially stabilising supply chains.
