Why NNPC May Not Distribute Dangote Petrol on Sunday

As the clock ticks down to September 15, 2024, there is some uncertainty about the Nigerian petroleum sector over the distribution of petrol from the Dangote Refinery. 

According to recent reports, a key factor in the potential delay or disruption is the need for a finalized commercial agreement between the Nigerian National Petroleum Company (NNPC) and Dangote Group.

The unsettled deal

The anticipation surrounding the September 15th date, when NNPC was expected to begin lifting petrol from Dangote’s $20 billion refinery, is now clouded by doubts. Investigations have revealed that as of earlier this week, there is no confirmed commercial agreement on the table. 

This was confirmed by multiple sources from both NNPC and Dangote, who disclosed that critical aspects of the deal, including the quantity and pricing of Premium Motor Spirit (PMS), remain unresolved.

On September 5, 2024, Adedapo Segun, NNPC’s Executive Vice President of Downstream, publicly assured that NNPC would start lifting Dangote petrol on the announced date. He highlighted that factors like foreign exchange rates and market forces would influence the petrol price, emphasizing that the market had been deregulated.

Despite this assurance, insiders close to the situation revealed that as of now, no official agreements have been signed. Government sources have indicated that the necessary terms and conditions for the deal are still under negotiation. 

According to a senior official at the Dangote refinery, “Right now, no documentation from NNPC and NMDPRA (Nigerian Midstream and Downstream Petroleum Regulatory Authority) on product lifting. Nobody has spoken to us that they want to pick up PMS on September 15.

This suggests that with just days left, the logistics and legalities needed to finalize such a significant operation are still pending. For such a deal, discussions on pricing and other conditions are crucial, and it appears these discussions have not yet been 

concluded.

The pricing puzzle

The question of pricing adds another layer of complexity to the situation. The potential for Dangote petrol to be more expensive than anticipated is a concern among market players. 

The Crude Oil Refiners Association of Nigeria (CORAN) has noted that without proper government concessions, the price could indeed be higher. CORAN’s Publicity Secretary, Eche Idoko, suggested that Dangote’s petrol might be more affordable if the federal government fulfills its promises regarding concessions.

Idoko emphasized the need for a special pricing arrangement for local refining, similar to practices in other regions. He expressed hope that once the government committee sets up for naira crude sale reports its findings, a fair pricing structure will be established.

What this could mean

The unresolved status of the NNPC-Dangote deal has broader implications beyond just pricing and logistics. Mr. Dan Kunle, a business adviser in the oil and gas sector, has urged President Bola Tinubu to intervene and address the ongoing issues surrounding petrol supply. 

He argues that the lack of clarity contributes to a socioeconomic crisis in Nigeria, affecting both the market and consumers.

The refining sector, represented by CORAN, is also advocating for a resolution that considers the interests of all stakeholders, including new entrants to the market. The association has expressed concern that the current state of negotiations could be a result of strategic positioning by both parties to gain a negotiating advantage.

What to expect

As of now, the NNPC and Dangote Group remain engaged in discussions, but the clock is ticking. The lack of a concrete agreement could mean that the much-anticipated lifting of petrol from Dangote’s refinery might not commence as planned. 

The situation underscores the importance of timely and transparent negotiations in the oil sector, where delays and unresolved issues can have far-reaching effects on both the market and consumers.

As Nigerians await further developments, the hope is for a resolution that aligns with the broader interests of the country and ensures that the transition to local refining and distribution is smooth and beneficial for all involved.