Table of Contents
Key Points
- NNPC ends exclusive off-taker deal with Dangote Refinery, allowing independent marketers to buy petrol directly, marking a shift in Nigeria’s fuel supply market.
- NNPC's move to foster competition and ease financial strain could raise fuel prices, as the company no longer covers the price differential.
- Dangote Refinery will now supply petrol directly to the market, potentially improving supply chain efficiency and reducing distribution bottlenecks.
The Nigerian National Petroleum Company Limited (NNPC) has ended its exclusive off-taker agreement with Aliko Dangote’s $20 billion Dangote Oil Refinery, nearly a month after the refinery began petrol production.
This move marks a significant shift in Nigeria’s fuel supply market, as independent marketers will now be able to buy petrol directly from the 650,000-barrel-per-day refinery, instead of relying solely on the NNPC as the intermediary.
NNPC cuts costs on Dangote petrol
The decision, confirmed by an NNPC official on Monday, is aimed at fostering competition and improving supply chain stability. “Yes, it is true. We can no longer continue to bear that burden,” the official said, referencing the financial strain the state-owned oil company has shouldered since it began distributing petrol from the Dangote refinery in September.
Under the previous arrangement, NNPC bought petrol from the refinery at N898.78 ($0.553) per liter and sold it to marketers at N765.99 ($0.472) per liter, absorbing a subsidy of nearly N133 ($0.082) per liter.
From Sept. 15 to 30, NNPC lifted 103 million liters of petrol from Dangote Refinery, loading 2,207 trucks out of 3,621 sent during this period. The trucks carried 102.97 million liters of the 400 million liters of petrol expected to be distributed, at a rate of 25 million liters per day.
NNPC exit opens fuel market competition
The Dangote Oil Refinery, the largest in Africa and the world’s largest single-train refinery, is set to transform Nigeria’s fuel supply system and broader economic landscape.
With the NNPC’s withdrawal as the exclusive off-taker, the market will open up to competition, allowing marketers to negotiate prices directly with the refinery or source products from other suppliers.
This shift towards a more liberalized market could improve supply efficiency and reduce bottlenecks in the distribution process.
NNPC's shift likely to raise fuel prices
The latest move by NNPC is likely to lead to higher fuel prices for Nigerian consumers. With the state-owned company no longer covering the price differential, fuel costs are expected to rise, adding pressure to households already grappling with inflation and a depreciating currency.
The resulting price increases will exacerbate the strain on real purchasing power, as Nigerians contend with escalating living costs driven by ongoing economic challenges.
The liberalization of Nigeria’s fuel market is part of a broader government effort to reform the petroleum sector and reduce the reliance on costly subsidies.
While it promises increased competition and potential long-term benefits, the short-term impact on fuel prices will test the resilience of consumers facing record inflation and currency volatility.
