- With the Nigerian National Petroleum Company Limited's new policy, allowing direct purchases from Dangote Refinery, oil marketers are evaluating whether to buy locally or import petrol
- Marketers consider buying from Dangote if prices are competitive and may import if cheaper
- Competition will prevent price monopoly and ensure market stability, Independent Petroleum Marketers Association of Nigeria (IPMAN) explained
Oil marketers could start importing Premium Motor Spirit, commonly known as petrol, after the Nigerian National Petroleum Company Limited (NNPCL) announced it would only purchase the product from the Dangote Petroleum Refinery if the market prices exceed the local pump prices in Nigeria.
According to the NNPCL, Dangote and other local refineries can sell directly to any marketer on a willing buyer, willing seller basis. The NNPCL also made it clear that it does not aim to serve as a distributor in a free market environment.
This, however, contradicts the statement made last week by Alhaji Aliko Dangote, President of the Dangote Group. The owner of the $20 billion refinery had indicated that the refinery was awaiting NNPC’s engagement and that the national oil company would be the sole domestic purchaser of its petrol.
Mustapha Zarma, National Operations Controller of the Independent Petroleum Marketers Association of Nigeria, remarked on the price of Dangote petrol, “We haven’t approached Dangote yet, but we’re considering contacting their sales department this week to get information on the pricing.”
Marketers may opt for Dangote or Import petrol based on cost
“If the price is competitive enough for one to buy and get his return on investment and the required margin, then we wouldn’t mind purchasing directly from him to complement what NNPC is bringing in or what NNPC would buy from Dangote.”
Zarma clarified that the Federal Government and NNPC's assertion that the Dangote refinery will sell its product at market prices implies that there will be no government intervention in the form of subsidies to alter the pricing.
He observed that, as a result, other dealers now have the chance to obtain the product from any producer at a lower cost, whether from domestic or international sources.
He pointed out that some oil marketers are currently importing diesel and others are buying from Dangote, suggesting that the purchase of petrol would follow a comparable trend, in light of NNPC’s recent position on Dangote petrol.
“I believe that we are going to analyse the price of Dangote petrol and see the advantages of buying from Dangote viz-a-viz importation. Whichever we feel is cheaper will automatically attract everybody, especially if importation is cheaper.
“That will bring about competition and I don’t think the government will allow price monopoly. They would want a competitive market where the laws of demand and supply would determine the local price of refined petroleum products, just like diesel is right now.
“And with that, there is going to be some kind of equilibrium in the pricing and there is going to be guaranteed sustainability of supply,” the Independent Petroleum Marketers Association Of Nigeria (IPMAN) official stated.
According to industry analysts, the Federal Government seems unlikely to end fuel importation, as evidenced by NNPC’s refusal to purchase Dangote’s petrol.
However, they noted that the recent rise in petrol pump prices suggests the government is methodically removing subsidies, in light of NNPC’s disclosure of spending more than N7.8 trillion on petrol subsidies.
In the presentation of NNPC’s audited financial statements for the 2023 business year in Abuja last month, Chief Financial Officer Umar Ajiya admitted that the oil company was shouldering a heavy financial burden due to subsidies on petrol imports.
Fuel price to be set by market dynamics - IPMAN
He said the government told NNPC to price the imported petrol at just half of the landing price. He added that, at times, the Federal Government would settle the difference, which could be deducted accordingly.
“What has been happening is that we have been importing PMS, landing at a certain price, and the government is telling us to sell it at half price. So, that gap between that landed price and the half price is what we call shortfall or we call it a subsidy,” the CFO had stated.
Speaking on the matter, Ukadike Chinedu, National Publicity Secretary of IPMAN, stated that although marketers were set to purchase from Dangote, the information from NNPC indicated that dealers were free to seek out cheaper sources for their products.
“From what is happening now, it means that the Petroleum Industry Act is being implemented, the removal of subsidies has come to stay and the price of petrol is to be determined by the economics of demand and supply.
“Now that NNPC has said they are not the sole off-taker of Dangote petrol, it then means that the price of the product would determine where we are going to buy it. If NNPC imports the product and its price is cheaper than that of Dangote, we will buy from NNPC. If Dangote’s price is cheaper than that of NNPC, then we will buy from Dangote. So, right now, competition will set in. Remember that diesel price rose as high as N1,600/litre and Dangote came in with his own at N1,200/litre, and the importers reduced their price to N1,100/litre.
Marketers eyeing cheaper imports as NNPC, Dangote prices compete
“It further dropped to about N950 and now revolves between N950 and N1,100 for both the imported ones and the ones produced locally. By the time competition sets in, the product will sell cheaper,” Ukadike stated.
When asked if marketers were planning to import if it turned out to be cheaper, he responded, he said the National President, Alhaji Abubakar Maigandi, has already initiated talks with investors who are in the process of securing funding in line with current market trends.
“So, we are talking with some foreign partners because you need to understand that independent marketers are the highest buyers of diesel from Dangote refinery because we control about 80 per cent of the filling stations nationwide. So, if Dangote PMS is cheaper we will buy it, but if importation is cheaper, we will go for it.”
President Bola Tinubu has recently directed that NNPC should sell crude oil to Dangote and other domestic refineries using naira.
Zacch Adedeji, the President’s Special Adviser on Revenue and Chairman of the Federal Inland Revenue Service explained that this decision would reduce Nigeria’s significant dependence on foreign exchange for crude oil imports, which constitutes about 30 to 40 per cent of its forex expenditure.
The revenue chief explained that switching crude oil transactions to naira is anticipated to greatly reduce the government's forex strain, with estimated yearly savings of $7.3 billion. Furthermore, it is expected to lower monthly forex costs for petroleum products from approximately $660 million to $50 million.
“Monthly, we spend roughly $660m in these exercises, and if you analyse that, that will give us $7.92bn savings annually,” he stated.
According to the reports, licensed individuals have been bringing diesel into Nigeria, but NNPC continues to be the exclusive importer of petrol in the present administration.
NNPCL announces date to lift Dangote Refinery petrol
Meanwhile, TheRadar earlier reported that the Nigerian National Petroleum Company Limited (NNPCL) had announced that it would begin lifting Premium Motor Spirit (PMS) from the Dangote Refinery on September 15.
This followed a denial by the Dangote Refinery that NNPCL had begun lifting petrol from their facility.