Toba Owojaiye reporting
Abuja, Nigeria
The recent announcement by the Nigerian National Petroleum Company Limited (NNPC) to end its role as the middleman in purchasing petrol from the Dangote Refinery signals a major shift in Nigeria’s petroleum sector.
The move allows independent marketers to directly negotiate prices with the Dangote Refinery, introducing a more competitive environment for petrol distribution.
Historically, the NNPC has served as the sole off-taker of petrol, essentially controlling fuel imports and distribution. This model has been widely criticized for fostering monopolistic practices and inefficiency, which often led to fuel shortages, high prices, and corruption in the subsidy regime. By stepping back from this role, NNPC is aligning with the principles of deregulation, allowing for direct market competition based on a willing buyer, willing seller model.
The Dangote Refinery, with a capacity to process 650,000 barrels of crude oil per day, began producing petrol earlier this year. While NNPC initially secured an exclusive deal to buy products from Dangote, the company has now been granted permission to sell directly to other marketers. This change is expected to stabilize fuel supply chains by removing the NNPC’s bottleneck, which has historically led to delays and inefficiencies.
Concerns have been raised, however, regarding the exclusion of independent marketers from the process. While some major marketers have been granted access, independent marketers have largely been left out, which the House of Representatives addressed in a recent motion.
The fear is that by allowing NNPC and major marketers to dominate petrol purchases, the market could become monopolistic, forcing smaller players to import fuel to remain competitive. This could drive up prices for consumers and limit market efficiency.
Adding to the complexity, the NNPC recently revealed that it has been purchasing petrol from the Dangote Refinery at N898.78 per litre and selling it at a subsidized price of N765.99 per litre to marketers, absorbing a subsidy of about N133 per litre. This practice has placed a significant financial burden on the NNPC, prompting its decision to step back from exclusive dealings with Dangote.
While NNPC’s exit from its middleman role could foster a more competitive market, the exclusion of independent marketers and the broader implications for Nigeria’s fuel pricing dilemma remain pressing concerns. The government’s ongoing struggle with fuel subsidies, market monopolies, and the potential impact on consumers underscores the complexity of achieving true deregulation in Nigeria’s energy sector. Public sentiment is likely to remain skeptical, especially if fuel prices continue to rise despite these reforms.
