The Dangote refinery may consider exporting its Premium Motor Spirit (petrol) after the Nigerian National Petroleum Company Limited (NNPC) declined to be its exclusive buyer.
In a statement by NNPC spokesman Olufemi Soneye on Saturday, the company said it would only purchase fuel from Dangote if it was priced lower than the international market rates.
This contradicts earlier statements by Aliko Dangote, President of Dangote Group, who had claimed the refinery was waiting on NNPC to begin buying its product.
NNPC clarified that it would fully purchase petrol from the refinery only if the market prices for Premium Motor Spirit (PMS) were higher than Nigeria’s pump prices.
Additionally, NNPC stated that Dangote and other domestic refineries are free to sell directly to any marketer on a “willing buyer, willing seller” basis, emphasizing that it has no intention of becoming the distributor for any company in a free market.
The statement was in response to claims made by the Muslim Rights Concern (MURIC), which alleged that the NNPC was undermining the Dangote refinery. MURIC argued that recent changes in petrol prices by NNPC would prevent Dangote from offering competitive prices and that the corporation had become the sole buyer of products from the refinery.
NNPC, however, stated that the pricing of petroleum products from any refinery, including Dangote’s, is determined by global market forces.
“The recent changes in PMS prices have no impact on DRL or any other domestic refinery’s access to the Nigerian market. In fact, if current prices are perceived as high, it presents an ideal opportunity for the refinery to sell its products at lower prices in the Nigerian market.
“Furthermore, we emphasise that there is no guarantee of lower prices associated with domestic refining compared to any global parity pricing framework, as confirmed by the DRL. The NNPC Ltd will only fully offtake PMS from the DRL if the market prices of PMS are higher than the pump prices in Nigeria.
” The DRL and any other domestic refinery are free to sell directly to any marketer on a willing buyer, willing seller basis, which is the current practice for all fully deregulated products. NNPC Ltd has no desire or intention to become the distributor for any entity in a free market environment, and therefore, the notion of becoming a sole off-taker does not arise.”
Soneye further explained that the NNPC could not undermine a business in which it had invested billions of dollars.
Dangote’s Anticipation
During the unveiling of the 650,000-barrel-per-day refinery on Tuesday, Aliko Dangote mentioned that the facility was prepared to begin producing petrol as soon as the NNPC was ready.
He added that once all necessary arrangements with the NNPC were finalized, petrol would reach filling stations within 48 hours, assuring that the current fuel shortages would soon be resolved.
“Our PMS can be in filling stations within the next 48 hours, depending on NNPCL,” he said.
He spoke further, “We are ready. I pray that within the next few days, you won’t see any petroleum queues as soon as we finalise with NNPC. We are ready, we are waiting for them (NNPC) and I hope they will be ready like yesterday.”
Dangote told newsmen that he could not disclose the price of the petrol because the NNPC was in a position to control it.
“On the pricing, I can’t say anything because we don’t control the pricing. At the moment, it is controlled by NNPC, not Dangote. We will wait for them. But, our own for now is to make sure that the product is available and round-tripping is stopped,” he noted.
The businessman emphasised that the NNPC was the company that would sell and distribute the product under the current naira crude sale arrangement.
“Once the NNPC is ready, we roll. We are even ready to load a ship this week,” he added.
It appears that negotiations between the two companies have broken down, which could lead to Dangote exporting its petrol abroad.
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The NNPC has repeatedly issued statements denying that it would set the price for Dangote’s fuel or be its exclusive buyer, even though the refinery has yet to begin production.
Many Nigerians have questioned why the NNPC raised the pump price of petrol on the same day Dangote refinery was unveiled, after months of quietly paying subsidies.
People who were hopeful that Dangote’s fuel would lower petrol prices are now beginning to lose hope.
Speaking on the Brekete Family live show on Monday, Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, stated that Dangote’s petrol would be exported if the NNPC and other petroleum marketers in the country refused to buy it.
Asked if the petrol would be sold locally, Edwin replied, “There has been a kind of a blockade from lifting our products within the country. The traders have been trying to blockade, and so now, we have been exporting our petroleum products. We are ready to pump in PMS as much as possible to the country.
“But if the traders or NNPC are not buying the product, obviously we will end up exporting the PMS as we are doing with the aviation jet and diesel,” he declared.
Edwin expressed surprise at the unexpected challenges the company began facing just as the refinery was set to start operations.
He reflected on the original goal of adding value to Nigeria’s raw materials, lamenting that after more than three decades, the country is still exporting crude oil and importing refined petroleum products.
Despite having a facility capable of loading 2,900 tankers per day, Edwin revealed that the refinery had utilized less than five percent of its capacity due to low demand from local buyers.
In an interview with our correspondent, Adeola Adenikinju, a professor of Economics at the University of Ibadan and President of the Nigerian Economic Society, suggested that the government and NNPC should prioritize buying petrol from the Dangote refinery instead of importing it.
“Dangote refinery is a private business; he will sell where he can make a profit. He can’t subsidize our economy. It’s still cheaper for NNPC to buy from Dangote than to import from Europe. Dangote needs to run his business and pay off debts, so he can’t afford to subsidize us,” Adenikinju explained.
IPMAN Ready to Buy Fuel
On Saturday, the Independent Petroleum Marketers Association of Nigeria (IPMAN) announced that it is ready to purchase petrol from Dangote at any price, even if the NNPC refuses to buy.
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