Plans are advancing for significant changes in the petrol lifting and distribution process in Nigeria, involving the Federal Government, the Nigerian National Petroleum Company Limited (NNPCL), and Dangote Refinery.
Currently, the NNPCL allocates crude oil for refining while also overseeing the distribution of petrol throughout the country, directly and through oil marketers and depot owners. This system allows the NNPCL to subsidize petrol prices, which remain high due to the low value of the Naira, currently around N1,600 to $1 in the unofficial market.
Under the proposed new arrangement, the NNPCL will still provide crude oil but will relinquish its dominant role in petrol distribution from the $20 billion Dangote refinery. This shift would allow oil marketers and depot owners to establish direct agreements with the management of the refinery, which has a capacity of 650,000 barrels per day.
Implementation Committee Meets
Sources indicate that the details of this new arrangement are set for review at the Implementation Committee on Crude Oil Sales in Naira, scheduled for Wednesday in Abuja. A government source stated, “The current arrangement has faced widespread criticism. If adopted, the proposed arrangement would open the market for all stakeholders, including major and independent marketers and depot owners.”
This change aims to eliminate the subsidies and under-recoveries that the NNPCL currently pays, enabling consumers to pay the full market value of petrol. It is also anticipated that the new structure will reduce uncertainty and attract both local and foreign investments into the sector, potentially leading to enhanced infrastructure and better services for consumers.
Reactions from Industry Leaders
Adetunji Oyebanji, Managing Director of 11Plc, welcomed the changes but noted that only companies with substantial financial resources would benefit. “It’s important to have the financial capacity to take advantage of this new system,” he said. “This is about selling large quantities to major distributors rather than small-scale sales.”
Robert Dickerman, CEO of Pinnacle Oil and Gas Limited, expressed skepticism regarding the impact on prices. He pointed out that Nigeria’s high fuel prices are largely due to the Naira’s devaluation, which affects the pricing of crude oil and petroleum products globally, as they are typically priced in US dollars.
Dangote Refinery’s Upcoming Supply
In line with an agreement between the Federal Government and Dangote Refinery, the facility is set to receive 24 million barrels of oil in October and November. This will allow the refinery to enhance its local production capabilities. Bloomberg reported that the refinery aims to take in up to 400,000 barrels of Nigerian crude daily over the next two months.
Additionally, the Minister of Finance announced that the sale of crude oil and refined products in Naira began on October 1, 2024. Following a recent meeting of the Implementation Committee, key stakeholders affirmed the commencement of this strategic initiative.
Starting October 1, the NNPCL will supply approximately 385,000 barrels of crude oil daily to Dangote Refinery, payable in Naira. In exchange, the refinery will provide petrol (PMS) and diesel to the domestic market, also to be paid for in Naira, with NNPCL managing the distribution of PMS through various marketers.
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