Oil marketers may soon start importing Premium Motor Spirit (PMS), also known as petrol, following a recent declaration by the Nigerian National Petroleum Company Limited (NNPCL). The NNPCL has stated that it will only fully offtake petrol from the Dangote Petroleum Refinery if the product’s market price exceeds the current pump prices in Nigeria.
NNPCL also announced that Dangote and other local refineries are free to sell their products directly to marketers on a willing buyer, willing seller basis, and emphasized that it does not intend to be the distributor for any refinery in a competitive market environment.
This approach contradicts recent remarks by Aliko Dangote, President of the Dangote Group, who indicated that his $20 billion refinery was waiting on NNPCL, claiming that the national oil company would act as the exclusive off-taker of its petrol within Nigeria.
In response to the slow-moving discussions between Dangote and NNPCL, oil marketers have expressed that they will source petrol from wherever it is most cost-effective, including through importation if that proves to be the cheaper route.
Zarma stated that the Federal Government and NNPCL have indicated that the Dangote refinery will sell its petrol at market-determined prices, which suggests that there will be no subsidies or government interference in the pricing of the product.
Accordingly, he pointed out that this opens up the opportunity for other dealers to source petrol from any supplier who offers a more competitive price, whether they are based locally or abroad.
Zarma further mentioned that while some oil marketers are currently importing diesel, others are sourcing it from Dangote. He predicted that a similar pattern would emerge for petrol purchases, reflecting NNPCL’s latest stance on Dangote’s petrol pricing.
Industry analysts suggest that the Federal Government appears reluctant to cease fuel importation, especially after NNPCL declined to become the primary off-taker of petrol from the Dangote refinery.
They noted that the recent rise in petrol pump prices is an indication that the government is gradually eliminating subsidies on the fuel. This move comes in light of NNPCL’s revelation that it has spent over N7.8 trillion on petrol subsidies.
Presenting NNPCL’s audited financial statements for 2023 in Abuja last month, Umar Ajiya, the company’s Chief Financial Officer, revealed that the company has been dealing with a substantial subsidy burden related to petrol imports.
Ajiya stated that the government directed NNPCL to sell the imported petrol at a price that is about half of its landing cost. In some instances, the Federal Government compensated the company for the losses, or the costs were offset.
While the official pump price of petrol stands at approximately N600 per litre, the average landing cost is around N1,200 per litre. Ajiya reported that NNPCL covered a “shortfall” of roughly N7.8 trillion in the first seven months of the year.
Commenting on the matter, Ukadike Chinedu, the National Publicity Secretary of IPMAN, noted that while marketers are open to purchasing petrol from Dangote, the recent announcement by NNPCL reveals that dealers are now free to seek out more cost-effective sources for their supplies.
“From what is happening now, it means that the Petroleum Industry Act is being implemented, the removal of subsidies has come to stay and the price of petrol is to be determined by the economics of demand and supply.
“Now that NNPC has said they are not the sole off-taker of Dangote petrol, it then means that the price of the product would determine where we are going to buy it. If NNPC imports the product and its price is cheaper than that of Dangote, we will buy from NNPC. If Dangote’s price is cheaper than that of NNPC, then we will buy from Dangote. So, right now, competition will set in. Remember that diesel price rose as high as N1,600 per litre and Dangote came in with his own at N1,200 per litre, and the importers reduced their price to N1,100 per litre.
“It further dropped to about N950 and now revolves between N950 and N1,100 for both the imported ones and the ones produced locally. By the time competition sets in, the product will sell cheaper,” Ukadike stated.
On whether marketers had started making plans to import if the imported product would be cheaper, he replied, “Our National President, Alhaji Abubakar Maigandi, has commenced discussions with some investors who are now in the process of securing funds going by the current trend in the business.
“So, we are talking with some foreign partners because you need to understand that independent marketers are the highest buyers of diesel from the Dangote refinery because we control about 80 percent of the filling stations nationwide. So, if Dangote PMS is cheaper we will buy it, but if importation is cheaper, we will go for it.”
