Level playing field?
Premium Times has reported that the NNPC is ending its exclusive purchase agreement with Dangote Refinery. It will no longer be the sole…
Premium Times has reported that the NNPC is ending its exclusive purchase agreement with Dangote Refinery. It will no longer be the sole off-taker, aligning with the current practices for fully deregulated products. This means independent marketers can now negotiate prices directly with Dangote Refinery, adding their differential, which may lead to a hike in the product’s price. With NNPC no longer covering the differential between Dangote’s selling price and the price to marketers, subsidies will cease to exist. This came after the Nigerian government said it had officially commenced the sale of crude oil and refined petroleum products in naira.
Initially, the NNPC seemed sceptical about the Dangote Refinery’s capabilities and appeared adamant about continuing its petrol imports regardless, but public outcry must have forced the FG to call the NNPC leadership to order. The NNPC then announced its exclusive purchase agreement with Dangote Refinery that would allow it to apply a level of subsidy to the product to bring it to par with imported products. However, that arrangement quickly fell apart so Dangote Refinery can now sell directly to independent marketers, who had been clamouring for complete deregulation of the space. Many Nigerians believe that the NNPC is the stumbling block preventing them from obtaining cheap and readily accessible petrol. This belief has also been fuelled by the opacity of NNPC’s operations and its constant refusal to communicate openly with Nigerians. The redundant state of the country’s refineries has worsened matters as many think that if NNPC explored crude oil and refined it in state-owned refineries, fuel prices would drop to around ₦200 per litre. This belief has extended to discussions around the Dangote refinery, where people assume that if crude oil is drilled and refined locally, the final price of petrol would be insulated from foreign exchange volatility. However, the eventual pricing of products from the Dangote Refinery has clarified that the freight component is minimal and does not significantly impact the pump price of petrol. Removing itself from the Dangote equation means that NNPC will no longer be seen as the face of petrol prices in Nigeria. This shift could enhance NNPC’s credibility in the downstream segment of the oil and gas sector and reshape its image as a helpless participant in retail petrol sales. However, this is not the case. NNPC’s retail segment is alive and well, and its partnership with OVH Energy remains strong. It remains unclear whether NNPCL will use scarce foreign exchange to import petrol from its European clients or rush to start refining (or blending) at its Port Harcourt Refinery. Will NNPC go head-to-head with Dangote for patronage from Nigerians, or will it position its retail arm as another distributor for the Dangote Refinery? Perhaps it may even consider divesting completely from its retail arm.