FEC orders NNPC to sell crude to Dangote, other refineries in naira, as IPMAN kicks
…No market can afford Dangote’s price rate — IPMAN
By Matthew Denis
The Federal Executive Council (FEC) has ordered the Nigerian National Petroleum Company (NNPC) Limited to sell crude oil to Dangote Refinery and other local refineries in naira.
The Chairman of the Federal Inland Revenue Service (FIRS), Zack Adedeji, disclosed this to State House correspondents after the FEC meeting chaired by President Bola Tinubu on Monday in Abuja.
He said the measure would reduce the strain on the country’s foreign spendings and stabilise the pump price of petrol, diesel and other products in Nigeria.
Adedeji said FEC ordered the NNPC to immediately begin the full implementation of the directive to boost local production of refined petroleum products in Nigeria.
The FIRS boss added that the Tinubu administration ordered that the sale of refined products from Dangote Refinery to oil marketers and distributors be denominated in naira and not in the United States dollars.
Despite the directive by President Ahmed Tinubu for NNPC to trade with the Dangote Refinery, independent marketers express scepticism, indicating that only the Nigerian National Petroleum Corporation (NNPC) can manage the pricing deal currently in play.
The comments come amid widespread speculation about the potential impact of Dangote Refinery on Nigeria’s petroleum market, especially as Aliko Dangote, President of Dangote Industries Limited, had earlier announced that the refinery was set to roll out its petrol in August 2024.
The Dangote Refinery, poised to be one of the largest in the world, is set to revolutionise the Nigerian oil and gas sector by increasing local refining capacity. Despite this optimism, fuel marketers remain cautious about the pricing structure and its implications for the market.
Zarma Mustapha, the Deputy National President of the Independent Petroleum Marketers Association of Nigeria, said that Premium Motor Spirit (PMS) from the plant would be sold at the international market rate, adding that no marketer would want to pay such price currently.
There has been no official communication from them yet on pricing for petrol. However, one thing I want you to understand is that even if the Dangote refinery starts to release products, particularly PMS, no marketer can be able to buy the product from him.
This is because the refinery is an independent commercial entity and they must recoup their cost of refining and add some margin before they sell out the product. The current price of the product within the country is below the international price of a litre of PMS.
“So you cannot buy the product from the refinery at the international price and then sell it at the prevailing price at the retail outlets. If you do, you are going to lose a huge amount of money, which is a difference of between N400 and N500/litre,” Mustapha said.
The IPMAN official, however, noted that for Nigeria to have Dangote petrol across its filling stations, the NNPC would have to intervene by purchasing the product and reselling it to dealers at discounted rates.
NNPC may have to offtake the product, just like they are importing from other countries for upward supply to Nigerian marketers, I think only the national oil company can offtake PMS from them and know how best they can continue to supply it to marketers to sell at the approved current price.
“If it is not done this way, no marketer will be able to buy the product and sell it at a loss of over N400 to N500/litre. It is not possible,” Mustapha said.
The NNPC is the only importer of petrol in Nigeria. Other independent and major marketers have ceased importing due to their inability to obtain the US dollars needed for PMS imports.
Mustapha revealed that the landing cost of petrol stood over N1000, exceeding the current pump prices in Nigeria, which range from N660 to N800 per litre, depending on the location.
Executive Secretary of Major Energy Marketers Association of Nigeria, Clement Isong, referred to a previously published landing cost of PMS, highlighting it as the true cost of the product.
“You have seen the published price, which reflects the realistic cost, and you are aware of the current pump prices. The Dangote refinery, being a business, will not operate at a loss. That’s all I can say,” Isong said.
