By Aaior K. Comfort
The Federal Government, Nigerian National Petroleum Company Limited (NNPCL), and Dangote Refinery have reached advanced plans to overhaul Nigeria’s petrol lifting and distribution process. According to an investigation, this significant shift aims to restructure how petrol is sourced and distributed across the country.
Currently, NNPCL is responsible for allocating crude oil for refining and managing the distribution of petrol across Nigeria. This has allowed NNPCL to subsidize petrol prices, a strategy that is increasingly challenged due to the low value of the Naira, which trades at around N1,600 per dollar in the unofficial market.
Under the proposed changes, NNPCL will continue providing crude oil but will relinquish its dominant role in distributing products from the $20 billion Dangote Refinery. This would open up opportunities for oil marketers and depot owners to negotiate directly with the management of the 650,000 barrels-per-day refinery, enabling them to lift petrol directly.
Implementation Committee Meets
Sources close to the matter revealed that the new framework will be reviewed during a meeting of the Implementation Committee on Crude Oil Sales in Naira, scheduled for Wednesday in Abuja. A presidency official confirmed, “The proposed arrangement would fully open up the market, allowing major, independent, and depot owners to actively participate. This move would also see the final removal of subsidies, pushing consumers to bear the full market price of petrol.”
The official added that this shift would eliminate uncertainties in the sector and attract both local and foreign investment, spurring infrastructure development to meet consumer demand.
Marketers React
Adetunji Oyebanji, Managing Director of 11Plc, applauded the development, stating, “This is a positive step. However, only companies with significant financial resources will benefit. It’s not just about selling a few trucks to small buyers but moving large quantities to big off-takers.”
Robert Dickerman, CEO of Pinnacle Oil and Gas Limited, noted that while Dangote’s refinery will increase oil production, it may not reduce petrol prices, which remain tied to the value of the Naira. “All crude oil and petroleum products are priced in US dollars,” he emphasized.
Dangote Refinery to Receive 24 Million Barrels of Oil
Following the agreement between the Federal Government and Dangote Refinery, the refinery will receive 24 million barrels of crude oil in October and November 2024, paid for in Naira. Bloomberg reported that Dangote’s facility, Africa’s largest refinery, is scheduled to process 400,000 barrels per day of Nigerian crude, reshaping both import and export markets.
This comes after the Minister of Finance confirmed that as of October 1st, 2024, the sale of crude oil and refined products in Naira had commenced. NNPC is expected to supply 385,000 barrels of crude daily to Dangote Refinery under the new arrangement.
In return, Dangote will supply petrol and diesel to the domestic market, with diesel available for sale to any off-taker and petrol exclusively to NNPCL, which will distribute it to marketers. All transactions will be conducted in Naira, removing the need for foreign exchange in the crude-for-products deal.
This development marks a significant shift in Nigeria’s energy landscape as the government aims to stabilize the market and eliminate subsidies.