The Dangote Refinery in Lagos has commenced processing premium motor spirit (PMS), commonly known as petrol. According to a report by American media outlet Reuters, the Nigerian National Petroleum Company (NNPC) Limited is set to become the initial exclusive buyer of the refinery’s products.
Testing has begun at the 650,000 barrel per day facility, with petrol expected to be rolled out in the coming weeks. Devakumar Edwin, Vice President at Dangote Industries Limited, confirmed that NNPC is prepared to exclusively purchase the refinery’s output to meet local demand. Edwin noted that if there are no buyers, the refinery will export the petrol, similar to its current practice with aviation jet fuel and diesel. However, he did not specify when the petrol will be available on the market.
NNPC Faces Supply Challenges
Trait Newpaper learnt that Nairametrics previously reported that NNPC Limited has acknowledged its significant debt to international oil traders, contributing to fuel shortages for local marketers. Recent reports reveal that NNPC owes these traders approximately $6 billion in subsidy obligations, causing them to suspend the supply of imported petrol to the national oil company.
Initially, NNPC denied these claims, but the company later admitted that outstanding debts have contributed to the ongoing fuel scarcity. NNPC confirmed in a statement, “NNPC Ltd. has acknowledged recent reports regarding significant debt to petrol suppliers. This financial strain has placed considerable pressure on the Company and threatens fuel supply sustainability. In accordance with the Petroleum Industry Act (PIA), NNPC Ltd. remains committed to its role as the supplier of last resort, working with relevant government agencies and stakeholders to ensure a consistent supply of petroleum products nationwide.”
Implications of the Dangote-NNPC Arrangement
The arrangement for NNPC to exclusively buy petrol from the Dangote refinery could provide much-needed relief to the company, which is currently struggling with international obligations to oil traders. This exclusive supply agreement could reduce importation and logistics costs, allowing local marketers to purchase petrol from NNPC at potentially lower prices.
This development could help alleviate the persistent fuel scarcity that has plagued Nigeria for over a month, addressing a significant issue with limited progress made by the national oil company.
With its capacity to meet domestic demand and export to other African countries, the Dangote refinery is well-positioned to stabilize Nigeria’s fuel supply. Additionally, the Federal Executive Council has recently approved the sale of crude oil to the Dangote refinery in local currency, with the condition that the refinery will sell processed petrol to Nigeria in the same currency.
These steps are expected to contribute to a long-term solution to Nigeria’s ongoing fuel scarcity issues.
