The Nigerian Federal Government is reportedly considering giving Aliko Dangote’s refinery the authority to set petrol prices for petroleum marketers, a move that could significantly alter the control the government has traditionally maintained over fuel prices.
According to Bloomberg, this decision is expected to be implemented as early as next month, according to officials who spoke in anonymity because they are not authorized to speak on the matter.
For years, Nigeria, Africa’s leading oil producer, has relied on imported petrol, subsidizing the cost at significant expense. With Dangote’s new refinery in Lagos now capable of producing petrol locally, this heavy reliance on imports by the Nigerian National Petroleum Company Limited (NNPC) is expected to reduce.
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However, the refinery, seen as a game-changer for the country’s energy sector, has been at the center of speculation about how its output will impact the local market, especially in terms of pricing.
In a recent statement, the company said that the price of petrol, known locally as Premium Motor Spirit (PMS), will be determined by the government.
“The PMS market is strictly regulated, which is known to all oil marketers and stakeholders in the sector, hence we cannot determine, fix, or influence the product price,” Dangote said.
Price Increases and NNPC’s Debt Crisis
The news of Dangote’s potential role in setting petrol prices comes at a time when the NNPC has been grappling with financial difficulties. As the sole importer of petrol, NNPC has been selling below market rates to control prices, a strategy that has led to substantial debt to international suppliers.
This week, the NNPC increased the price of petrol by 45%, bringing it to N897 per liter, a move that pushed prices closer to market levels after months of financial strain. The NNPC admitted it owes N7.8 trillion in subsidy debts for the seven months leading up to July, which has crippled its ability to maintain a steady fuel supply across the nation.
Fuel scarcity has become a pressing issue in major cities as the NNPC’s mounting debts limit its capacity to import and distribute fuel. This scarcity, coupled with price increases, has led to public frustration, as Nigerians face rising costs in an already difficult economic environment.
Marketers’ Concerns of a Monopoly
The prospect of Dangote setting prices and NNPC continuing as the sole off-taker of petrol from the refinery has raised concerns among petroleum marketers. Many have argued that granting NNPC exclusive access to Dangote’s fuel could create a monopoly in the downstream sector, further complicating the market for independent marketers.
While stressing the importance of making fuel accessible to all marketers, not just NNPC, Chinedu Ukadike, Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria (IPMAN), expressed concerns about this arrangement. He stated that it could lead to monopolistic practices and profiteering.
“The most important thing is availability,” he said. “We are not against the increase in fuel prices as marketers, but the fuel must be available for us to buy. The arrangement between Dangote and NNPC, which makes NNPC the sole off-taker, should be reconsidered. As major stakeholders and independent marketers, we believe Dangote should be allowed to sell directly to us.”
His concerns were echoed by Engr. Atinuke Owolabi, President of the Association of Professional Women Engineers of Nigeria, Lagos Chapter, said, “It is dangerous for NNPCL to be the sole distributor of Dangote fuel. We do not want a monopoly again. Let Dangote distribute to all marketers so that we all have access to the fuel, which belongs to the people.”
The Dissolution of NNPC Retail and Nueoil Energy
Lending credence to the call for Dangote Refinery to sell directly to marketers is the recent dissolution of the downstream arm of the NNPC, NNPC Retail, and Nueoil Energy by the Corporate Affairs Commission (CAC). This follows a court ruling that transferred ownership of NNPC Retail to OVH Energy Marketing Limited. With NNPC Retail no longer in existence, many are questioning why Dangote is waiting for NNPC to lift petrol from its refinery when the company no longer has a retail business.
Against this backdrop, marketers and stakeholders are calling on the Federal Government to intervene and ensure that the distribution of petrol from Dangote’s refinery is open to all, rather than being controlled by a single entity.
It is believed that if the Federal Government grants Dangote Refinery the power to set petrol prices, it could reshape the country’s entire fuel market.
While local production from Dangote’s refinery is seen as a solution to Nigeria’s dependence on imported fuel, the challenge currently seems to lie in ensuring that the pricing and distribution structure is fair and competitive. Independent marketers fear that NNPC’s exclusive access to Dangote’s fuel could lead to market distortion, with potential price hikes and limited availability for smaller players in the sector.
However, Speaking on TVC News’ “Journalists’ Hangout” show on Thursday, the Executive Vice President of Downstream, NNPC Ltd., Mr. Adedapo Segun, reiterated that PMS prices are governed by unrestricted free market forces, as provided for in the Petroleum Industry Act (PIA), 2021.
“The market has been deregulated, meaning that petrol prices are now determined by market forces rather than by the government or NNPC Ltd. Additionally, the exchange rate plays a significant role in influencing these prices,” he said.