Confusion persists about how Dangote Oil Refinery will distribute the petroleum it is about to start releasing to the market and at what price the Premium Motor Spirit (PMS) will be sold for. Just last week, a statement was released announcing that The Nigerian National Petroleum Company Limited (NNPC) will be the sole off taker i.e. buyer of Dangote Refinery’s PMS or petrol. This implies that the NNPCL would fix the price and sell the product at a subsidy.
Last week, Senator Heineken Lokpobiri, the Minister of State for Petroleum, announced that neither the NNPLC nor the government would be fixing the price of petrol, citing the sector’s “deregulation.” This statement was made less than 24 hours after Dangote Refinery Limited (DRL) revealed that the NNPLC had not yet begun lifting petroleum from the refinery. DRL’s statement clarified that, contrary to the Minister’s claim, the sector remains regulated, with the government still setting petrol prices (PMS). The Dangote Refinery also noted that it is in ongoing negotiations with the government regarding the price at which its products will be sold.
Muslim Rights Concern (MURIC) Wades in
The controversial religious organisation, the Muslim Rights Concern (MURIC) yesterday issued a statement claiming that the Nigerian National Petroleum Company Limited (NNPC) is sole off-taker of petrol products from the Dangote refinery and that the NNPLC’s decision to increase the price of petrol to N855 per litre is aimed at preventing Dangote Refinery from selling PMS to Nigerians at a lower price.
In a statement signed by Chief Corporate Communications Manager, Olufemi Soneye, the NNPCL has clarified again that petroleum product prices from Nigerian refineries will be determined by international oil prices. The NNPLC explained that it is not likely that petrol from the Dangote Refinery will be cheaper than imported petrol, as the prices are determined by “global market forces”. This goes against the widespread expectation in the media and the Nigerian public that Dangote Refinery will lead to cheaper petrol price and even help Nigeria conserve foreign exchange.
“Lower Prices in the Nigerian Market” Versus ” Global Market Prices
The NNPLC statement did not explicitly say that the government will stop subsidising petrol even while emphasising that “there is no guarantee of lower prices associated with domestic refining compared to any global parity pricing framework” and affirming that petrol is now a “fully deregulated product” which the Dangote Refinery and other domestic refineries “are free to sell directly to any marketer on a willing buyer, willing seller basis”.
This seems to imply that petrol in Nigeria is to be sold at the market price ( i.e. without government subsidy) which is now around N1,300 per litre. But the NNPLC also said in its statement that “The NNPC Ltd will only fully offtake PMS from the DRL if the market prices of PMS are higher than the pump prices in Nigeria“. (Emphasis added). This odd sentence in the NNPCL’s statement seems to mean that NNPCL will buy PMS that Dangote is allowed to sell at market prices if only Dangote Refinery’s market prices are lower than the subsidised “pump price” of N855 per litre in Nigeria. The Nigerian National Petroleum Company Limited has itself in its statement made it known that “domestic refining” does not guarantee “lower prices” than “global parity pricing framework”.
Hints of Lingering Dispute With Dangote Refinery
This raises many questions. The NNPLC is owing international oil traders $6.8 billion, a fact which is responsible for its inability to import adequate supply to meet demand in Nigeria and the pervasive three-month long queues for PMS. Is it the NNPLC’s intention a “hands off” approach, i.e. to allow Dangote Refinery to fill the gap in the market as its own capacity to import dwindles ? Nigerians are likely to be fiercely critical of this “back door” approach to abolishing the fuel subsidy. Dangote Refinery is also likely to be wary of getting the flak for selling petrol to Nigerians. This may explain why Dangote Refinery issued a statement saying that NNPLC has not started to lift petrol from the refinery because they are yet to agree on price. There is a clear conflict between Dangote Refinery’s position that the downstream sector is regulated and it cannot fix the price of PMS and the NNPCL’s unequivocal statement that the sector is now deregulated and Dangote and other Nigerian refineries are free to sell at market prices and on “willing seller, willing buyer” basis.
Tellingly, Dangote Refinery’s statement inferred that petrol is ready to be lifted at its refinery but is not been lifted by the NNPCL only because it is yet to agree on a price with Nigeria’s state-owned petroleum corporation. This is in a context where motorists spend hours on petrol queues.
