…Panic rises as fuel price may increase
By Charles Ebi
Nigeria National Petroleum Company Limited, NNPCL, seems to have agreed and bowed to pressure from the independent Marketers and concerned industry players about the dangers of monopolizing supplies of Petroleum Motor Spirit, PMS, from the Dangote Refinery. However, the news came with palpable fear as Nigerians are panicking that petrol prices could increase nationwide as the Nigerian National Petroleum Exporting Company , NNPC Limited, has reportedly quit its sole petrol buyer position in the 650,000 barrel per day capacity Dangote Refinery.
The move opens up the market for other marketers to buy petrol directly from the refinery, meaning retailers will likely price petrol based on their margins.
Nigerian National Petroleum Company Limited,NNPCL, is said to have ended its exclusive purchase agreement with Dangote Refinery, opening up the market for other marketers to buy petrol directly from the refinery.
This means NNPCL 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.
Recall that when the Dangote Refinery started processing petrol in September, the NNPCL was the only entity allowed to buy and resell to marketers, who then distribute to others.
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.
But the NNPCL, 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 off-taker of all products from the Dangote Refinery. It said the refinery was free to sell its petrol to any marketer.
The NNPCL 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.
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 September 26, 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 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 said 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 stabilizing 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 NNPCL 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 liter, 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% performance, records show.
NPC’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 NNPCL 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.
The NNPCL lifted about 103 million litres 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.
Now, with this agreement possibly phasing out, it means many marketers will decide the price at which they will sell the product, a move that may lead to a hike in the product’s price.
This development also means marketers can now source products from anywhere, promoting competition and potentially stabilising supply chains.
It also means that importation of petrol will likely continue if marketers are not comfortable with the prices being negotiated with Dangote Refinery.
