KEY POINTS
- NNPCL to stop dominating petrol distribution.
- Marketers will deal directly with Dangote Refinery.
- Petrol subsidy removal will affect prices.
The federal government, Nigerian National Petroleum Company Limited (NNPCL), and Dangote Refinery have been advancing plans to implement significant changes in Nigeria’s petrol lifting and distribution process.
Currently, the NNPCL allocates crude oil for refining and manages the distribution of petrol across the country, both directly and through oil marketers and depot owners.
This system allows the NNPCL to subsidize petrol prices, which remain high due to the low value of the naira, currently around N1,600/$ in the unofficial market.
NNPCL to reduce involvement in petrol distribution
Under the new plan, NNPCL will still supply crude oil but will not dominate product distribution from the refinery. This shift will create opportunities for oil marketers and depot owners to negotiate directly with the $20 billion refinery.
Vanguard reported that the Implementation Committee on Crude Oil Sales in Naira will review details of the new arrangement at a meeting tentatively set for Wednesday in Abuja. A source from the presidency said: “The current arrangement has faced widespread criticism. Adopting the proposed plan would fully open the market to major, independent, and depot owners, enabling them to participate in the sector. Additionally, the removal of the subsidy or under-recovery that NNPCL continues to pay would allow consumers to bear the full cost of petrol.
“We expect the new arrangement to eliminate uncertainty and attract both local and foreign investment in the sector.” The development of more infrastructure is likely to enhance the value for consumers.
Adetunji Oyebanji, managing director of 11Plc, called the development positive but noted: “Only companies with significant financial resources can take advantage of it. Smaller players may struggle. You need financial strength to participate. This isn’t about selling one or two trucks of petrol but moving large quantities to major buyers, like distributors.”
Robert Dickerman, chief executive officer of Pinnacle Oil and Gas Limited, said Dangote’s oil production might not lead to lower fuel prices. He attributed high prices in Nigeria to the naira’s weak value, noting that crude oil and petroleum products are priced in U.S. dollars.
Dangote Refinery takes centre stage in new crude oil deal
Bloomberg reported Monday that Dangote Refinery is expected to take in up to 400,000 barrels per day of Nigerian crude over the next two months. The refinery is shifting its supply to locally sourced crude as it transforms Africa’s import and export markets.
The Finance Minister announced three days ago that, in line with a directive from the Federal Executive Council, crude oil and refined petroleum products would officially be sold in naira starting Oct. 1, 2024.
The government confirmed the initiative’s commencement after a post-commencement review meeting of the Implementation Committee, chaired by the Finance Minister on Oct. 3, 2024.
Last month, the Presidential Committee on the Sale of Crude Oil and Refined Products announced that NNPCL would begin supplying 385,000 barrels of crude oil daily to Dangote Refinery on Oct. 1, 2024.
The government added: “As of Oct. 1, NNPCL will supply about 385,000 barrels per day of crude oil to Dangote Refinery, with payment in naira. Dangote Refinery will supply petrol and diesel of equivalent value to the domestic market with payment in naira. We will sell diesel in naira to any interested buyer, and we will sell petrol to NNPCL for distribution to marketers. Also, we will pay all associated regulatory costs in naira.
