Babatunji Wusu –
The Nigerian National Petroleum Company Limited (NNPC) has officially terminated its exclusive purchasing agreement with Dangote Refinery, thereby opening the market for other petroleum marketers to procure petrol directly from the refinery. This pivotal change, as reported by PREMIUM TIMES, represents a significant shift in the Nigerian petroleum landscape, allowing marketers to negotiate prices on a “willing buyer, willing seller” basis, rather than relying solely on NNPC.
Key Developments:
- Market Deregulation: This transition aligns with Nigeria’s existing practices for fully deregulated petroleum products, such as diesel, aviation fuel, and kerosene, which are already available for direct sales.
- Dangote Refinery’s Capacity: With a production capacity of 650,000 barrels per day, Dangote Refinery commenced petrol production in September. Initially, the NNPC was to be the exclusive purchaser, according to Dangote’s Vice President, Devakumar Edwin.
- Expanded Access: Recent announcements from the NNPC clarify that Dangote Refinery can now sell to any interested marketer, effectively lifting the previous single-offtaker restriction.
On September 15, NNPC began loading petrol from Dangote but initially restricted access to major marketers, excluding independent marketers from lifting the product. In response, the Nigerian House of Representatives urged the government to instruct both NNPC and Dangote Refinery to permit access for independent marketers, with lawmaker Oboku Oforji expressing concerns that such exclusions could lead to monopolistic practices and force independent marketers to resort to fuel imports for competitiveness.
Implications for the Market:
- Potential for Monopolistic Practices: Oforji criticized the exclusive arrangements, labeling them as greedy and detrimental to market health, especially given NNPC’s historical struggles with crude management and refinery operations.
- Liberalized Fuel Market: NNPC’s decision to step down as the sole buyer signals a move toward a fully liberalized fuel market in Nigeria, potentially phasing out petrol subsidies. Marketers will now purchase petrol directly from Dangote at cost, establishing their own pricing, which could lead to increased fuel prices for consumers.
- Enhanced Competition and Supply Stability: The ability for marketers to source petrol from multiple suppliers, not just Dangote, fosters a competitive market environment that may enhance supply stability across Nigeria. This broader access could stimulate investment in storage and distribution infrastructure, thereby improving product availability nationwide.
As NNPC confirmed its shift away from exclusive purchasing, the implications of this change could reshape Nigeria’s fuel landscape, encouraging competition and potentially leading to a more robust and efficient market.
