The Nigerian National Petroleum Company Limited (NNPC) is ending its exclusive purchase agreement with Dangote Refinery. As a result, this change allows other marketers to buy petrol directly from the refinery.
Consequently, NNPC will no longer be the sole off-taker, meaning that marketers can now negotiate prices directly with Dangote Refinery. This shift aligns with practices for fully deregulated products, where refineries can sell directly to marketers on a willing buyer, willing seller basis.
Earlier in September, Devakumar Edwin, vice president of Dangote Industries Limited, announced that the Dangote Refinery is processing 650,000 barrels per day. Moreover, he indicated that NNPC would initially buy products exclusively.
However, NNPC clarified that it was not the only off-taker for all products from Dangote Refinery. The company stated that the refinery could sell its petrol to any marketer. In addition, NNPC explained that both Dangote and other domestic refineries can sell directly to marketers.
On September 15, NNPC started loading petrol from the Dangote Refinery. Later on, reports emerged that some major petroleum marketers were approved to lift products under an agreement with NNPC. Nonetheless, independent marketers remained excluded.
On September 26, the House of Representatives urged the federal government to ensure that NNPC Ltd and Dangote Refinery allow independent marketers to lift petrol directly. They also encouraged Dangote Refinery to establish tank farms or depots across Nigeria. This initiative would improve public access to petroleum products.
Furthermore, this call followed a motion moved by Oboku Oforji (PDP, Bayelsa). He highlighted that excluding independent marketers threatens competition in the sector. Specifically, he emphasized that competition is vital for reducing costs. Thus, some marketers might resort to importing products to survive.
NNPC is withdrawing as the sole off-taker. In this context, this change lets other marketers purchase petrol from Dangote Refinery at market prices. As a result, it promotes competition and could stabilize supply chains.
NNPC’s spokesperson, Femi Soneye, was unavailable for comment. Nevertheless, a top official confirmed the development. “Yes, it is true. We can no longer continue to bear that burden,” the official stated.
In September, NNPC claimed it was buying petrol from Dangote at N898.78 per litre. It sold to marketers at N765.99 per litre, absorbing a subsidy of nearly N133 per litre. Between September 15 and 30, NNPC lifted about 103 million litres of petrol from the Dangote Refinery. In total, it loaded 2,207 of the 3,621 trucks sent.
Implications of the Shift
NNPC’s exit as the sole off-taker signifies a major move towards market liberalization. Consequently, marketers can now source products directly from Dangote or other suppliers. Furthermore, with NNPC no longer covering the price differential, subsidies will cease. Marketers will purchase petrol directly from Dangote at market prices, which may lead to an increase in prices as they add their own margins.
Additionally, marketers will have the freedom to source products from various suppliers. This enhances competition and could stabilize supply chains.
