NNPC Limited: Does this limit the market of the Dangote Refinery?

Full of patriotism, bewildered by anger, yet motivated by the plight of the common man – and these days even the not so common man; I write this as a bewildered Nigerian who is finding it quite difficult to wrap his head around the non-musical tango between Dangote Refinery (DR) and NNPC Ltd. Aliko Dangote, at an Afreximbank event, revealed that the cabal in the oil sector is far more dangerous than the cabal in the drug trade or drug cartels. He spoke from experience as he navigated the murky waters of the oil industry while developing his refinery. Drug cartels are registered criminals and there are no secrets about the heinous and illegitimate businesses they run.

But the cabals. They are wolves in sheep’s clothing but they act as if they are leading a flock to safety. The tango between NNPC Ltd and DR has exposed the face, the methods and the grand plan of the oil cabals. They are a mix of IOCs, regulators and marketers. All three came for the head of DR when it entered the oil market. It had come for their golden fleece from which they continue to reap the majority of Nigerians.

The IOCs came for DR, they would not give him crude or sell him exorbitantly. They claimed contractual agreements with foreign buyers while violating our laws which stipulate priority sales to our local refineries. Then came the regulators in the form of NMDPRA (Nigeria Midstream & Downstream Petroleum Regulatory Authority) who criticized his refinery, the quality of his products and even the legality of his operations. The National Assembly went on a fact finding mission. DR was of incredible standards and so were his products. The Federal Government interfered in the arbitration/conciliation meetings of the Minister of State for Petroleum. The President wielded the big stick and gave a directive in council that NNPC Ltd sells crude to DR in naira. DR must also sell its products locally in naira. I understand that the presidential directive on the sale of crude in naira is supposed to start sometime in October or so. After all the bottlenecks, problems, hurdles and the triathlon with the top oil industry executives, namely the IOCs and the NMDPRA, the DR is on the verge of rolling out PMS, the liquid gold of the Nigerian economy.

You would think that was the end of it but nope, there was another hurdle. Price! And then another hurdle to thwart the rollout as NNPC Ltd was to be the sole distributor of the PMS. And then another merry-go-round in terms of pricing and offtake of the products. DR said it was waiting for NNPC Ltd. Then NNPC said DR was on its own. The price should be determined by the market and any marketer can buy the products. It is not yet clear whether NNPC Ltd would be the sole distributor. While the product is ready, the politics in the oil industry have refused to allow us to “taste the sweetness” and appreciate the clarity of DR’s PMS. Inadvertently, all the red tape and cabal-induced setbacks have shed more light on what is really going on in the industry and why the common man and even the unsophisticated man still queue up for fuel and buy it at exorbitant prices, going as high as N1,300 in some states.

When DR entered the diesel and kerosene market, they came across diesel at N1,700. They distorted the market and made it cheaper, to as much as N900, N1,000 and finally to around N1,200 per litre. Although it is more affordable for you and me, it was bad business for the marketers. They were not ripping us off as they should have been with DR’s price. Devakumar VG Edwin, Vice President Oil & Gas at DR, revealed that this price hike was not well received by the marketers as they even wrote a letter to Mr. President to complain.

They boycott DR diesel and jet fuel and opted to buy the more expensive and inferior imported fuels. Only small traders buy from DR and their purchase is a mere 3% of the 54 million litres DR can produce daily, provided crude oil is available. It means that if DR injects PMS into the Nigerian market, there would be a 60% drop in the price of PMS just like it was with the supply of diesel and jet fuel. It may not be that high but there will definitely be a drop. This is what the marketeering arm of the cabal and the remaining oil cabals fear and do not want. They want more exorbitant prices, more forex thrown at them at only God knows what rates to import, and import. Billions of dollars, not less than N3 billion was spent on importing PMS in six months. N5.8 trillion worth of PMS has been imported in just the first six months of 2024. The PMS import business is the largest in the country. The forex involvement is also the highest in the country. Those at the end of this drain pipe will do anything to keep it flowing. That is the dilemma we are stuck in. We saw a sudden increase in the prices of PMS from N600 plus to N800 plus at NNPC/OVH outlets.

There was no announcement. The Minister of Petroleum said they never authorised price increases. So why the increase? Is it to enforce the DR PMS price? After all, the 600 plus naira price is supposed to be ‘regulated’ (not ‘subsidised’) by NNPC. It means that NNPC could try to regulate the DR PMS price, which means that some individuals can still enjoy ‘regulation money’. Some industry experts claim that NNPC Ltd has agreements with foreign factories and is stuck with contractual PMS until about the end of the year, hence the azonto dance around DR PMS rollout. The situation is a bit sketchy but the picture is very clear. Those who export the crude oil are making a killing. Those who import the products are also making a killing. Finally, those who sell locally are making another killing. It is a vicious circle of ‘killings’. All on top of our ordinary and not so ordinary heads. The regulators? Hmm. Tufiakwa! Cabals in chief.

In the midst of all this, the DR Vice President also revealed that NNPC wants about 10 staff permanently stationed at DR to monitor DR processes as they would be supplying the crude and buying back the products in naira. After all, NNPC would buy the PMS right? The back and forth continues. But why would a regulator want to be stationed permanently like that? Is this what is available globally? Are there no estimates of expected products from quantities of refined crude oil as monitoring guidelines? This tie-in to DR operations is quite disturbing. They should have completed their 20% buy-in of the refinery in the first place and prepared themselves for the reality of a functional independent refinery of this size. Apparently, this $20 billion investment is proving too big and blessed to be compromised out of the game. Interestingly, Dangote is willing to bear the loss of buying and selling in naira as the exchange rate plummets. Now we wait, pray and see.