Dangote Refinery has made it known in a statement signed by Anthony Chiejina, the Group Chief Branding and Communications Officer of Dangote Group that the Nigeria National Petroleum Company Limited (NNPCL) is yet to commence lifting refined Premium Motor Spirit (PMS) from its refinery. Dangote Refinery was reacting to a story in BusinessDay, “NNPC lifts Dangote Petrol, sells at N897 per litre”.
Dangote Refinery had announced in the last one week the commencement of production of Premium Motor Spirit (PMS), commonly known as petrol and the agreement to have the Nigeria National Petroleum Company Limited (NNPCL) as the sole buyer or off taker of its petrol.
Amidst a biting petrol scarcity, Nigerians have gleefully welcomed the commencement of the production of petroleum at the Dangote Refinery, hoping it would relieve the scarcity and long petrol queues they have experienced in the last three months.
“We are yet to finalise our contract with the NNPC”
The Dangote Refinery also made it known in the press statement that it is yet to finalise the contract with the NNPCL, “therefore, the issue of fixing the price of petrol lifted from our refinery does not arise”.
According to Chiejina, “The PMS market is strictly regulated, which is known to all marketers and stakeholders in the sector”.
Chiejina explained that Dangote Refinery cannot “fix, or influence the product price, which falls under the purview of relevant government authorities”.
A market in a flux: Dangote Refinery and Nigeria’s Multibillion Petrol Subsidy
Dangote Refinery’s statement underscores the questions that Nigerian economists and oil and gas sector pundits have raised about government/NNPCL’s extensive interventions in a sector that industry legislation i.e the Petroleum Industry Act (PIA) stipulates should operate as a free market. They have questioned the role of the government in fixing PMS prices and the announcement that the NNPCL should act as the sole buyer and distributor of petrol from Dangote Refinery
Dangote Refinery’s statement suggests that Africa’s largest refinery is yet to agree a lot of important details with the NNPLC, details which the Federal Government of Nigeria will be very interested in given their importance to the country’s finances and connections to politically sensitive issues such as the fuel subsidy.
Nigeria is estimated to spend about N62 billion every month on the fuel subsidy and owes international oil traders $68 billion in arrears (the refusal of traders to respond to NNPCL’s tenders for PMS is responsible for the scarcity of petroleum in the country).
Due to selling crude oil in advance (forward sales) to obtain scarce foreign exchange to support the naira, Nigeria’s capacity to supply crude oil to the 650,000 barrels per day Dangote Refinery is limited. Dangote Refinery has to import crude oil at international market prices to have enough refined product to supply even to the Nigerian market.
With the NNPCL, its sole off-taker owing international traders $6.8 billion, the question arises where the NNPCL or Dangote could find the dollars to pay for the imports of “supplementary” crude. Dangote Refinery is located in an export zone and has the option of exporting the petroleum it produces and selling in other African countries at market, non-subsidised prices. The refinery started production of diesel three months ago and its exports of diesel to African countries is already displacing established European refineries in the region.
Analysts believe that eliminating the subsidy on petrol would solve many problems at once – by eradicating the smuggling of petrol, significantly reduce the volume of petroleum that Nigeria consumes, incentivise local refining and reduce pressure on the naira.
