Major Oil Marketers to Directly Purchase from Dangote Refinery as NNPC Withdraws

Major oil marketers in Nigeria are set to begin direct purchases of Premium Motor Spirit (PMS), commonly known as petrol, from the Dangote Petroleum Refinery. This shift comes as the Nigerian National Petroleum Company Limited (NNPC) ceases to be the sole off-taker of the product from the $20 billion facility.

Sources from both the NNPC and the Major Oil Marketers Association of Nigeria confirmed on Tuesday that the NNPC would no longer monopolize the off-taking of petrol from Dangote’s refinery, thereby opening opportunities for other players in the downstream sector to purchase directly from the plant.

In an apparent move to end petrol subsidies, oil marketers indicated that the NNPC’s decision implies a systematic removal of government subsidies on petrol. Previously, it was reported that the Federal Government might spend approximately N236 billion monthly to subsidize petrol imported through the NNPC and sourced from Dangote’s refinery.

The NNPC was reportedly bearing a subsidy cost of about N3.3 billion per day for Dangote’s petrol, resulting in a potential monthly expenditure of N99 billion. By stepping down as the exclusive off-taker, it is anticipated that the NNPC could eliminate this fiscal burden.

A senior official from a major oil marketing firm disclosed, “It was formally stated that marketers should not go through NNPCL anymore and should directly purchase from the Dangote refinery.” This official requested anonymity as they were not authorized to speak on the record.

Reports have surfaced that the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) released new petrol prices higher than the current rates, although these claims remain unconfirmed. George Ene-Ita, the NMDPRA spokesperson, did not verify these reports when contacted.

In response to the developments, the National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, Ukadike Chinedu, acknowledged that petrol prices would likely rise once subsidies are fully withdrawn. “Nigerians should brace for this reality,” he stated while expressing cautious optimism about the effects of selling crude in naira.

Industry experts noted that while major marketers have been advised of the new purchasing directive, actual transactions have yet to commence. It is anticipated that by next week, marketers will begin direct dealings with Dangote’s refinery, pending finalization of price settings by the refinery.

Despite the unverified status of the price template by NMDPRA, documents suggest potential hikes in petrol prices to as high as N1,029.01 per litre in some regions, exceeding current pump prices. This anticipated change hinges heavily on market forces following the withdrawal of NNPC’s exclusive purchasing role.