The Nigerian National Petroleum Corporation (NNPC) has officially stepped back from its position as an intermediary for the sale of petrol from the Dangote Refinery. This move marks a significant shift in the dynamics of fuel distribution in the country. The decision is expected to impact supply chains and market operations as the Dangote Refinery moves toward direct sales of its refined products.
This development aligns with the current practices for fully deregulated products, allowing refineries to sell directly to marketers on a willing buyer, willing seller basis.
In September, Devakumar Edwin, Vice President at Dangote Industries Limited, announced that the Dangote Refinery, with a capacity of 650,000 barrels per day, has commenced petrol processing.
In response to claims that the Dangote Refinery was being undermined, the NNPC clarified that it is not the exclusive offtaker for all products from the refinery. The NNPC emphasized that the Dangote Refinery is free to sell its petrol to any marketer.
Furthermore, the NNPC reiterated that both the Dangote Refinery and other domestic refineries can engage in direct sales to marketers under the willing buyer, willing seller framework, which is standard for fully deregulated products like diesel, aviation fuel, and kerosene.
On September 15, the NNPC began loading petrol from the Dangote Refinery. Although some major petroleum marketers were later approved to lift products under an agreement with NNPC Ltd, independent marketers were notably excluded.
On September 26, the House of Representatives urged the federal government to mandate both NNPC Ltd and Dangote Refinery to permit independent marketers to lift petrol directly from the refinery. The lower chamber also called on Dangote Refinery’s management to establish or partner in creating tank farms or depots across the country’s geopolitical zones, enhancing public access to petroleum products.
This motion was introduced by Oboku Oforji (PDP, Bayelsa), who emphasized that the exclusion of independent marketers poses a threat to competition within the sector.
What does it imply?
NNPC’s withdrawal as the exclusive off-taker for Dangote petrol signifies a major step towards a fully liberalized market. This change enables marketers to obtain products directly from the Dangote Refinery or other suppliers.
With NNPC stepping back, it will no longer absorb the difference between Dangote’s selling price and the price charged to marketers. This means subsidies will end. Marketers will now purchase petrol directly from Dangote and sell it at cost price, plus their own margin, which could result in higher prices for consumers.
Additionally, marketers can now source petrol from a variety of suppliers, not just Dangote. This increased competition could help stabilize supply chains and potentially lead to more competitive pricing in the market.