Nigerians are not only excited when Aliko Dangote commenced refining of products but the joy is that the Nigerian National Petroleum Company Limited, NNPCL, has confirmed readiness of three local moribund refineries coming back to production this year.
Nigeria has experienced monopolistic downstream market operations for decades aided by weak fiscal policies and deep rooted corruption.
But vain efforts to shut out those involved in the practice heightened last year when the NNPLC said it will soon end its monopoly on petrol supplies.
The group chief executive of the company Mele Kyari, said in a televised conversation a day after it nearly tripled prices at its fuel stations countrywide.
President Bola Tinubu, at inauguration of his administration last year removed fuel subsidies a popular but costly benefit that has drained billions annually from government coffers.
Mele Kyari told Arise TV specifically that prices were expected to come down once new companies started supplying petrol, bringing more competition.
“All we did was to set variable prices depending on our costs by location and knowing full well that NNPC is the single supplier of the market and we are seeing that exit coming very, very quickly,” said Kyari.
“There will be no monopoly, NNPC will not continue being supplier of this product alone.”
Kyari has previously said the Company was owed $6 billion in petrol subsidy payments by the federal government.
Under the Petroleum Industry Act signed into law two years ago, NNPC cannot supply more than 30 per cent of petrol in Nigeria.
“As soon as the market stabilises, oil marketing companies are able to come in. Competition will surely come in … and you will see changes in prices downwards,” said Kyari.
Nigeria imports most of its refined petroleum products because it has run down its refineries over the years.
The 650,000 barrel per day Dangote refinery was also commissioned day amid hopes of transforming the country into a net exporter of petroleum products
The Huge Cost Of Monopoly
Despite assurances by the NNPCL to break the monopolistic industry, the practice continues with heavy toll on the industry and extension of scarcity pain on the populace.
Just a few weeks back the country was launched into another round of scarcity.
Several factors were tabled as the root causes of the scarcity and price escalation.
But deep into the investigation recalls that the NNPCL is soaked in debts because it remained the sole importer of petrol into the country.
At the heat of the scarcity the company made spirited efforts to restore confidence of international petroleum products suppliers after some of them backed down following report of debt hanging over $6 billion.
Our correspondent’s findings showed that the company in a measure to sustain importation made a payment of N200 billion so as to resume importation.
An impeccable industry source who confirmed the payment however, said current negotiation to persuade suppliers to resume business may lead to some delays in product procurement which has led to current rationing of products in the country.
Building petrol queues in major Nigerian cities was attributed to limited importation of Premium Motor Spirit (PMS) also called petrol in Nigeria.
Some marketers confirmed to our correspondent that there is already a supply glitch at the moment.
Report said Nigeria is facing challenges over debt to suppliers which is reported to have surpassed $6 billion doubling since April.
The NNPCL, is currently struggling to cover the gap between fixed pump prices and international fuel costs, six industry sources said.
The chairman, Board of Trustees (Treasurer) of the Independent Petroleum Marketers Association of Nigeria, (IPMAM) Elder Chinedu Okoronkwo, said rationing of products has been observed in the last few days.
To further compound the situation is the shutdown of the NNPCL portal through which marketers place order and make payments.
The national president of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr Billy Gillis-Harry, confirmed the platform shutdown but said the NNPCL claimed it is being upgraded.
Dr Billy Gillis-Harry, said it would be a matter of urgency for the company to consider any other emergency measures to ensure products are made available to marketers.
With the portal now down, he said marketers cannot procure products and this would further create another round of bottleneck.
Some retailers who spoke on the matter said the shutting of the portal implies there is much products available and the company is applying the measure to avert panic when marketers place order without receiving products.
“The portal shutdown is affirmation of unavailability of products but the NNPCL should be strategic enough to build a buffer to keep supply going in the case of this sort of issue,” a marketer said.
Beside President Bola Tinubu ending fuel subsidies last year, allowing pump prices to triple the NNPCL also capped pump prices shortly afterward as citizens coughed under rising cost of living.
The cap, coupled with a naira currency crash allowed the subsidy to creep back as government expects the subsidy to cost at least $3.7 billion this year.
Analysts, NGOs and even government officials have slammed the subsidy for years as wasteful and corrupt, but Nigerians, who get few government services, have long seen cheap fuel as their right, especially in the current cost-of-living crisis.
The NNPC began struggling early this year when late petrol payments surpassed $3 billion.
The company has still not paid for some January imports, traders said, and the late payments amount to $4 billion to $5 billion and under contract terms, NNPC is meant to pay within 90 days of delivery.
The NNPC Declined To Comment
“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” one industry source said.
At least two suppliers already stopped participating in recent tenders after hitting self-imposed debt exposure limits to Nigeria, the sources said, meaning they will not send more gasoline until they receive payments.
Traders thrive in risky environments, but they place limits on how much credit they allocate per trade in order to avoid too much exposure on one borrower. These limits vary by company based on their size and where they operate.
As a result, Nigeria’s tenders to buy petrol in June and July were smaller, traders said.
The NNPCL will import via tender about 850,000 tonnes in July, two of the sources said, down from the typical 1 million tonnes in previous months.
Fresh fuel queues have already started to form in Lagos and Abuja this week, and some Abuja stations stopped selling gasoline.
Nigeria, imports virtually all its fuel due to years of neglect at its state-owned oil refineries.
The newly opened 650,000 barrel-per-day Dangote refinery has not yet produced marketable petrol, and is selling other fuels abroad.
The country has few savings to fall back upon as corruption and wasteful spending have eaten up decades of oil revenues.
The NNPCL has also mortgaged much of its spot oil cargoes, limiting what it can sell for cash.
In late 2023, NNPCL secured its biggest-ever oil-backed loan worth $3.3 billion from AfreximBank and a consortium of traders to shore up the country’s foreign exchange.
Marketers Demand Petrol Supply Diversity
Petroleum products marketers are already dismayed by the continuous monopoly in the system.
Their investments are tied down due to the practice which breached the implementation of the PIA.
They recently raised concerns about possible supply and pricing challenges soon except effective policy management is applied in the supply chain.
A media engagement hosted by the Major Energy Marketers Association of Nigeria, MEMAN, revealed that the landing costs of petroleum Premium Motor Spirit(petrol) as of July 16, 2024, is N1,117 per litre.
It was also revealed that the landing costs of AGO (Diesel) is N1,157 for a 20KT vessel and ATK at N1,217 for a 15KT vessel landing in Apapa, Lagos.
The MEMAN’s Quarterly Press Webinar and engagement with energy correspondents offered speakers at the session to highlight the ongoing financial strain on Nigeria due to the subsidies.
They argued that promoting supply diversity enhances competition in the petroleum industry, which is supported by effectively implementing the Petroleum Industry Act (PIA) 2021 to streamline operations and reduce costs in refining or importing petroleum products.
Independent consultant and former chief operating officer, Upstream of the NNPCL, Mr. Bello Rabiu, in his presentation on the theme: “Immersion of Dangote Refinery in the PMS Supply Chain(Call for Competitive, Efficient and Sustainably Liberalised Downstream and Petroleum Sector in Nigeria),” disclosed that a total of 1.3 billion litres of NNPC PMS were imported into the country through a Direct Sale-Direct Purchase (DSDP) arrangement.
He stated that it is not competitive for the NNPCL to be the sole marketer, controlling supply and fixing prices, effectively running a monopoly within the Nigerian downstream sector.
Rabiu said that the NNPCL’s monopolistic control contradicts the Petroleum Industry Act (PIA) 2021, which aims for a competitive environment with multiple suppliers.
According to him, lack of transparency in the pricing and importation process has led to significant revenue leakages and potential hidden subsidies.
He added that the market lacks a clear, competitive framework, resulting in inefficiencies and high costs
Rabiu emphasised that since PMS is the only regulated product, adding that the regulation is essential due to its significant role in the downstream sector.
He highlighted the current administration’s key agendas, which include ensuring the security of petroleum products, ending subsidies, promoting inclusive growth, and eliminating leakages.
According to him, “To achieve an efficient oil and gas sector across upstream, midstream, and downstream systems, the market must be liberalized, with all refineries and pipeline works operational.
Rabiu said, ‘Regulation does not mean the removal of subsidy alone. It must extend to ensuring that there is a profitable investment for everyone supplying in the downstream sector. It is not competitive that only one marketer controls supply, pricing, and other aspects.
He stated that The NNPCL is running a monopoly as the only supplier, a dominant player in the sector.
” Questions remain regarding regulatory oversight, crude supply, pricing models, and the role of NNPCL in a market with new local suppliers,” he said.
Rabiu lamented that the country is still bleeding because the exact amount paid as a subsidy remains unknown.
He said, ‘We are yet to see the subsidy that is supposedly gone,’ he noted. He also pointed out that marketers are not importing due to access to forex, and everyone is dependent on NNPC and PPMC. He called for transparency in the cost of importing and determining the price of products.
Additionally, Rabiu argued that refining petroleum products domestically for consumption is better than importing refined products.
He explained that because NNPCL continues to be the major importer, it is challenging for any refinery to scale up due to higher production costs compared to imported products.
Former Chief Operating Officer, Upstream of the NNPC emphasised that the Nigerian Government spends N1.5 trillion Naira monthly on petroleum product importation into Nigeria.
Rabiu has therefore suggested the reintroduction of a pricing template to encourage market efficiency and competitive behaviour.
He also called for regulatory intervention in the short term to ensure the smooth entry of new players and protect consumers .
According to him,the long-term goals include transparent market practices, anti-competitive safeguards, and promotion of alternative energy sources
Dr. Abiodun Adedipe, Chief Consultant of B. Adedipe and Associate Limited, while speaking on issues in local supply and refined petroleum products, said that the sole importation of petroleum products by NNPC has created more crises for the downstream sector.
He added that this monopoly is the reason why things are not working, and the price hike at the fuel pump is due to the inefficiencies of NNPCL in the downstream market.
According to him, to address these issues, the government should allow a level playing field for everyone. He stated that, at the moment, modular refineries and other big refineries cannot operate effectively due to NNPC’s monopoly.
He identified the current challenges in local supply to include persistent oil theft and related challenges have led to a decrease in production, causing divestment and discouraging new investments in the oil sector.
Adedipe noted that the importation of fuel and lubricants has increased significantly, contributing to market distortions and pressure on the Naira in the FX market.
He said, “ The cost of importing fuel and lubricants has increased dramatically, highlighting the need for a more efficient and cost-effective local supply chain.
Speaking further he said Nigeria has the installed refining capacity to meet local demand and even export products.
“However, the local refineries are not operating at full capacity due to insufficient feedstock and other operational challenges.
“Meanwhile, increasing local refining capacity is crucial to reduce dependence on imports and stabilize prices.
Adedipe has therefore called on all stakeholders, including oil producers, refiners, marketers, transporters, consumers, media, NGOs, and development partners, to collaborate to ensure a stable and efficient supply chain.
According to him, the stakeholders must also ensure transparency and competition in the market is essential to avoid monopolistic practices and promote fair pricing.
To address the crisis he said,” aggressively pursuing energy diversification is critical for long-term stability and sustainability.
“Strong regulatory oversight is needed to ensure transparency, competition, and accountability among all stakeholders.
“Focus on refining sufficient products locally to reverse the trend of importing fuel and lubricants, thereby reducing costs and market distortions,” Adedipe said.
Key recommendations from the engagement include engaging stakeholders to ensure cost recovery for refiners and PMS importers, resisting anti-competitive practices, and enforcing fair competition through NMDPRA and FCCPC. It was also suggested that transparency in the downstream value chain and managing price volatility through monthly guided prices are crucial while repositioning and adequately funding NNPCL Pipelines and Storage under a PPP arrangement, encouraging alternative energy sources like LPG, CNG, LNG, and EVs, and recognizing the impact of the Dangote Refinery in the deregulation process are also essential.
In addition participants talked about increasing local refining and addressing the challenge of insufficient locally sourced feedstock for domestic refineries will further support these efforts.
Experts further recommended recognizing the interconnected roles of various industry stakeholders, including oil producers, refiners, marketers, transporters, consumers, media, NGOs, and development partners.
They advocated for periodic, all- inclusive industry stakeholder meetings to keep the industry informed on various issues.
They added, “Promoting sustainability, transparency, compliance, and fair practices, as well as encouraging the private sector to develop and share benchmarks for the landed costs of major crude oil products and other relevant market parameters, are also essential. Additionally, supporting the expansion of the industry with local refineries and fostering collaboration for growth is crucial for the sustainability and economic growth of the energy industry.”
Addressing Midstream And Value Chain Challenges At Stakeholders Summit
The Society of Petroleum Engineers (SPE) Nigeria Council has announced the 47th edition of the Nigeria Annual International Conference and Exhibition (NAICE) 2024.
This prestigious event is scheduled to take place from August 5 to August 7, 2024 at Eko Hotel, Lagos, with the theme “Petroleum Industry Value Chain Optimization: The Inevitability of Midstream and Downstream Development.”
The NAICE 2024 will provide a platform for industry professionals, stakeholders, and enthusiasts to discuss and explore advancements in the petroleum sector, focusing on optimising the midstream and downstream segments of the value chain.
The conference will feature high-profile sessions, keynote addresses, and technical discussions aimed at driving innovation and growth in the industry.
“The development of midstream and downstream sectors is inevitable to enhance efficiency, ensure sustainability, and maintain competitiveness. By adopting a comprehensive and integrated approach, leveraging technological advancements, and adhering to regulatory frameworks, the industry can achieve significant improvements in both profitability and environmental performance,” said Salahudeen Tahir, Chairman of, the Society of Petroleum Engineers (SPE) Nigeria Council.
Breaking Feared Local Refining Monopoly
What appear to be cheering news was resonated again when the Group Executive Officer, GCEO of the NNPCL, Mele Kyari, dropped information that the Port Harcourt, Warri and Kaduna refineries are very much likely to resume operations this year.
If that happens, then Nigeria will be a net exporter of refined petroleum products by December this year, based on the emerging indicators in the oil and gas sector and pacify agitating minds of alleged monopoly in the local refining market.
The NNPCL head, Kyari told the National Assembly when economic stakeholders, including the Ministers of Finance, Wale Edun; Minister of Budget and National Planning, Atiku Bagudu; Minister of State Petroleum Resources (Oil), Heineken Lokpobiri; and the Governor of the Central Bank, Olayemi Cardoso, had discussions with the Senate Committee on Finance led by Senator Sani Musa of Niger East.
To the excitement of the lawmakers, Kyari, said that the Port Harcourt refinery would likely start production early next month, while Warri refinery will take its turn months later, and the Kaduna refinery coming on stream latest in December this year.
He added that in a few months, the oil production level for the country would hit 2 million barrels per day, as all the enablements towards that had already been put in place.
“Mr Chairman and members of the joint committee, let me just confirm that NNPCL and the oil and gas industry are very critical in bringing about a turnaround in our current economic situation, and we understand the importance of this. We are taking every step that is practical for us to achieve this.
“We have already seen growth in our oil and gas production because of certain actions that Mr President personally took, and the very mere truth that we have also declared war on production activities, and this is yielding the required results.
“The combination of these two has now seen us restoring production in our country, and we believe that, as the Honorable Minister has said, we will soon hit the target of 2 million barrels of oil production per day.” Kyari assured.
He went on to state that there are several comments in the public space around the refining business and domestic production, including production that will come from the commissioned Dangote refinery.
“Yes, this country, as we have said, will be a net exporter of petroleum products by the end of this year.
“We’re very optimistic that by December, this country will be a net exporter. That means a combination of production coming from us, and also from the Dangote refinery and other smaller producing companies that we know are in line to do this. So, I can confirm to you that by the end of the year, this country will be a net exporter of petroleum products.”
He added, “We have spoken to a number of your committees, and it is impossible to have the Kaduna refinery come into operation before December, it will get to December, both Warri and Kaduna; but that of Port Harcourt will commence production early in August this year.”
The assurances are coming when Dangote refinery management confirmed another delay in pushing out Premium Motor Spirit (PMS) that is referred to as petrol, saying the product from the plant will hit local market by August this year.
Aliko Dangote, who owns the $20 billion facility, stated this during a media conference.
He also revealed plans to list the refinery on the stock market in the first quarter (Q1) of 2025.
Dangote said that he will commence the sale of petrol directly to marketers beginning in August 2024.
According to Dangote, the refinery will commence full operations in 2024, starting with refining of intermediate products such as polypropylene, naphtha, RCO, gasoline, diesel, and jet fuel.
He said the refinery’s steady-state production phase commenced in March 2024, noting that it will ramp up production to 500,000 barrels per day (bpd), with 15 crude cargoes a month by August, 550,000 bpd by end of the year, and 650, 000 bpd by first quarter of 2025.
“Petrol production is to commence in July with sales from August,” Dangote noted.
Dangote said that the crude supply challenge, which affected the supply of petrol from the refinery, was resolved last week after the federal government intervened.
He also announced plans to list the much-anticipated refinery and fertilizer plants on the Nigerian Exchange Group (NGX) by the first quarter of 2025.
The decision to list the two subsidiaries comes as the conglomerate seeks to expand its investor base and unlock further value for shareholders.
Strengthening Crude Supply Challenges To Indigenous Refiners
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), has also made a dedicated attempt to broker a deal with crude producers to ensure supply efficiency to domestic refiners.
The deal struck on Wednesday is to enable the Commission ensure that pricing would not impede domestic refining.
The regulator the deal is to allow sales of crude to domestic refiners at market prices, ending a supply dispute that had strained relations with international oil companies.
Nigeria relies on imports for most of its fuel needs due to inadequate refining capacity, although a 650,000 barrel-a-day refinery built by Aliko Dangote and operational since February, should make it self-sufficient and able to export.
The agreement follows complaints from the Dangote Refinery that oil majors were hindering local crude purchases by demanding excessive premiums or saying they had no available supplies.
“We will never allow price strangulation to disincentivise our domestic refining capacity optimisation,” NUPRC’s chief Gbenga Komolafe said following talks with oil companies grouped under the Oil Producers Trade Section (OPTS).
He said the regulator would work to ensure there was no “crude supply profiteering,” although he also said it did not condone any loss-making in oil production.
To ensure transparency, Komolafe requested monthly cargo price quotes on crude oil supply and delivery from both producers and refiners and said it was up to the regulator to balance upstream development with a sustainable domestic energy supply chain.
In March, the NUPRC chief met with oil producers and refiners to address refineries’ lack of access to locally produced crude oil.
