Worries Over Petrol Price As Tinubu Deregulates Downstream Sector

• NNPC, marketers may import petrol to complement Dangote’s output

• Stakeholders seek transparency in Dangote-NNPC operations

After repeatedly denying any intention to reintroduce fuel subsidies, which amounted to over N7.7 trillion in about one year, there are indications that President Bola Tinubu has finally given the nod to deregulating the downstream petroleum sector.

Consequently, there are indications that the pump prices of Premium Motor Spirit (PMS) will go up again by an additional N130 per litre across the country.

Following the Nigerian National Petroleum Company Limited’s (NNPCL) decision to end the exclusive offtake of products from Dangote Refinery after the expiry of the initial letter of credit issued to the refiner, sources familiar with the current pricing template told The Guardian that petrol prices will settle at around N1,100 per litre in Abuja, against the current average of about N990 per litre. In Lagos, the product will move to about N1,000 per litre, while motorists in the north will pay more.

The Guardian also learnt that the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) is being mandated to strictly monitor the pricing of white products and facilitate the import of products to supplement the daily 10 million litres that the Dangote Refinery supplies.

Instead of NNPC being the sole importer, a role the national oil company has played for over nine years, private companies, according to sources who pleaded anonymity, will now import and sell the products at a market-driven price.

While the NNPC spokesman, Olufemi Soneye, did not respond to calls and messages about the development, The Guardian learnt that the decision to end the exclusive offtake of the product came due to pressure from Nigerians, including the National Assembly, to free the market and allow marketers to buy products from local refiners.

It was gathered that the decision, which the Dangote team and marketers only learnt about through the press, was a way for the Tinubu government to avoid the middleman issue and prevent the government from having to provide subsidies, especially the N130 per litre that was being absorbed on the PMS.

In recent years, most marketers, including the major players, have become accustomed to learning about industry changes through the media, including the recent price increase, which moved pump prices to about N1,000 from N650 per litre.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) told The Guardian that they are anticipating direct supply arrangements following reports that the NNPCL may cease to be the primary off-taker of petrol from the Dangote Refinery.

IPMAN’s national president, Abubakar Shettima Maigandi, confirmed to The Guardian that, as of the time this report was filed, NNPCL still maintained its position as the off-taker from the Dangote Refinery.

He stressed that they were promised to start getting Dangote’s product from NNPCL retail.

“So, after NNPC gets their volume, they will allocate a portion to independent petroleum marketers. We are still waiting for them to start giving us our share. If they are indeed stepping back, we, as independent marketers, should receive our allocation. Right now, we are waiting for the volume from them, through NNPC, so that we can go to the Dangote Refinery and begin loading,” he said.

Maigandi emphasised that selling crude oil in naira to Dangote Refinery is a welcome development that should ease and suppress the enormous cost of PMS.

“They said they will be giving Dangote crude oil in naira, and then we marketers will also be buying in naira. Let’s see how they will start their negotiations. Nigerians should not panic, as we are seriously discussing the way forward with NNPC,” he said.

Meanwhile, hope is building for a naira crude deal with Dangote Refinery. The Federal Government plans to deliver up to 400,000 barrels of Nigerian crude oil daily amid soaring Premium Motor Spirit (PMS) costs.

This potential agreement could provide a crucial lifeline for consumers struggling with rising fuel prices and help stabilise the local economy.

This new development followed the Federal Government’s announcement that the naira-for-crude deal has commenced, which will amount to 24 million barrels of Nigerian supply between October and November 2024.

Energy expert Prof Dayo Ayoade stated that the Petroleum Industry Act (PIA) 2021 does not anticipate NNPC Ltd as a middleman for any player, particularly not for private refineries in Nigeria.

He cautioned that allowing everyone to access PMS directly from the Dangote Refinery could lead to significant consequences, stating that such a scenario would make managing issues related to under-recovery or subsidies difficult.

“Can the government pay subsidy to every private person who picks up PMS? That could become disastrous, as the fraud we saw in the subsidy regime would now really come into play. I am not aware of any of the NNPC margins added to costs.

“The whole operation system between Dangote Refinery and NNPC Ltd is opaque. Until we have transparency and all documents are published publicly, it will be difficult to trust what we hear.

“The players have not published any documentation as to what the true cost is. What is Dangote’s cost in refining and providing a litre of PMS? Does it include the PMS, the crude oil they bought from the US? If it uses mostly or 100 per cent Nigerian crude, what is the price? I don’t know any of this, and I don’t think any analyst does,” he said.

Ayoade stressed that the fuel crisis has not ended and will not end easily because of the ongoing crisis in the Middle East, what is happening between Iran and Israel, and the potential for war, with the possibility that the Middle East tensions will affect the oil price, and that is why the oil price is creeping up at about $78 per barrel.

“So, we are not going to benefit all that much from this increased revenue. What we are also going to experience is the downside of the increase in the oil price, which is that the price of PMS is going to go up. Because we are still importing, as far as I know importing has not stopped, the Nigerian government should be ready to spend more, whether they call it a subsidy, under-recovery, or over-recovery. The government is going to have to put more money into this,” he said.

Source: Guardian