The Nigerian National Petroleum Company Limited (NNPC) has reportedly stepped back as the sole buyer of petrol from the Dangote Refinery, allowing marketers to negotiate prices directly with the refinery.
According to a report today Monday, October 7, 2024, this move signifies a major shift towards full deregulation of the downstream petroleum sector, enabling refineries to sell directly to marketers on a "willing buyer, willing seller" basis.
In September, Dangote Industries Limited’s vice president, Devakumar Edwin, announced that the 650,000 barrels-per-day Dangote Refinery had started processing petrol. However, the NNPC clarified that it was not the sole offtaker of all products from the refinery, stating that Dangote and other domestic refineries were free to sell directly to any marketer under deregulated market conditions.
The NNPC had initially started lifting petrol from the Dangote Refinery on September 15, with major petroleum marketers also granted permission to lift the product under an agreement. Independent marketers, however, remained excluded from this arrangement.
On September 26, the House of Representatives urged the federal government to direct the NNPC and Dangote Refinery to allow independent marketers to purchase petrol directly from the refinery. They also called for Dangote Refinery to establish or partner in building depots across Nigeria’s geopolitical zones to ease access to petroleum products for the general public.
Oboku Oforji, a lawmaker from Bayelsa, raised concerns about the exclusion of independent marketers, warning that it stifled competition and could lead to higher costs. He added that some marketers might resort to importing fuel to survive in the market.
"NNPC and major marketers being the exclusive off takers creates a monopoly, which is tantamount to greed," Oforji stated during the session, emphasizing the importance of competition in driving down prices.
Sources familiar with the situation confirmed that NNPC's withdrawal as the sole buyer would open the market to other marketers. This is expected to foster competition and stabilize supply chains. An unnamed official confirmed the decision, saying, "We can no longer continue to bear that burden."
The NNPC had earlier disclosed in September that it was purchasing petrol from Dangote Refinery at N898.78 per litre and selling it to marketers at N765.99 per litre, covering a subsidy of almost N133 per litre. Between September 15 and 30, the NNPC lifted about 103 million litres of petrol from Dangote, but it fell short of its planned capacity, managing to deliver just 26% of the 400 million litres earmarked for lifting during that period.
The withdrawal of NNPC as the sole buyer marks a significant milestone in the deregulation of the Nigerian petroleum market. Marketers will now source products directly from Dangote Refinery or other suppliers, selling at cost price with their own margins added, which may lead to price adjustments. Additionally, the competition is expected to help stabilize supply chains and end the NNPC’s subsidy coverage.
As of the time of this report, NNPC spokesperson Femi Soneye had not confirmed the development.
