NNPC ties Dangote petrol price to forex rate

Okechukwu Nnodim, Dare Olawin, Daniel Adaji and Nathaniel Shuaibu

As Nigerians eagerly await the release of Premium Motor Spirit, popular known as petrol, from the $20bn Dangote Petroleum Refinery, the Nigerian National Petroleum Company Limited says it will lift the product from the plant on September 15 but outlined factors that would determine its price.

It said foreign exchange rates and market forces would influence the cost of petrol, stressing that the market had been deregulated.

This came as oil marketers declared on Thursday that about 2,000 tankers were still awaiting to load the product at various depots of the national oil company in Lagos, Warri and Port Harcourt.

Also, the Federal Government declared that there was going to be a massive supply of petrol at the weekend as vessels had started offloading, but ruled out PMS price fixing.

Operators stated that the government might have put an end to petrol subsidy going by its latest position on the pricing of PMS.

NNPC said foreign exchange illiquidity had been a significant factor influencing the fluctuation in prices of petrol, which are governed by unrestricted free market forces, as provided for in the Petroleum Industry Act.

The Executive Vice President of Downstream, NNPC, Adedapo Segun, said on Thursday during a live television programme that the current fuel scarcity was expected to “subside in a few days as more stations recalibrate and begin selling PMS.”

He said Section 205 of the PIA, which established NNPC, stipulated that petroleum prices were determined by unrestricted free market forces.

“The market has been deregulated, meaning that petrol prices are now determined by market forces rather than by the government or NNPC Ltd. Additionally, the exchange rate plays a significant role in influencing these prices,” Segun added.

Dangote petrol

On the commencement of lifting PMS from the Dangote refinery, Segun said NNPC was awaiting the September 15 timeline provided by the refinery, adding that the national oil firm had nearly a thousand filling stations nationwide and was collaborating with marketers to “ensure that stations open early, close late, in order to maintain adequate fuel supply to meet the needs of Nigerians.”

“We are also engaging relevant authorities to ensure product diversions are prevented and timely deliveries to all stations are ensured. The scarcity should ease in the next few days as more stations recalibrate and begin operations,” he stated.

2,000 tankers

Meanwhile, the National Operations Controller of the Independent Petroleum Marketers Association of Nigeria, Mustapha Zarma, told one of our correspondents that dealers had most of their trucks trapped at depots awaiting product from NNPC.

“The queues in Abuja are heavy. Nobody is loading. Right now, most of the tickets of independent marketers, which had been paid for since the last three months, have not been cleared to load,” Zarma told The PUNCH.

“And with the recent increase in the price of petrol, there has not been any official statement to say that this is the additional money you are supposed to pay before you lift your order. It is only the retail arm of NNPC that is lifting products to their stations.

“We have over 2,000 trucks that are at the various depots and they will not give you the product now until you pay up the difference. And up till now, they have not communicated to us what the difference is.”

This came as Dangote refinery announced on Thursday that NNPC had not started lifting its petrol.

In a statement, the Dangote Group Chief Branding and Communications Officer, Anthony Chiejina, debunked a report that NNPC was selling its petrol at N897/litre.

Chiejina said the attention of the group was drawn to a headline, ‘NNPC lifts Dangote petrol, sells at N897 per litre’, published by a national daily (not The PUNCH).

“We would like to state that NNPC has not commenced lifting of refined Premium Motor Spirit (PMS), commonly known as petrol, from our Dangote Petroleum Refinery.

“Therefore, the issue of fixing the price of petrol lifted from our refinery does not arise, as we are yet to finalise our contract with NNPC,” Chiejina stated.

“The PMS market is strictly regulated, which is known to all oil marketers and stakeholders in the sector, hence we cannot determine, fix, or influence the product price, which falls under the purview of relevant government authorities.

“We urge the public to disregard the headline as it is misleading and does not represent the true position in this matter. We are guaranteeing Nigerians of exceptionally high-quality petroleum products that will be readily available all over the country.”

30 million barrels

NNPC also said it had supplied 30 million barrels of crude oil to the Dangote refinery so far, planning an additional 17 million barrels soon.

Segun, who said this was part of the Federal Government’s decision to sell crude to local refineries, disclosed this Thursday while speaking on Arise Television.

According to him, the company will supply 6.3 million barrels in September and 11.3 million barrels in October.

“We have supplied about 30 million barrels to Dangote so far, 6.3 million this month, and we will supply 11.3 million in October,” he stated.

Segun noted that the 6.3 million barrels would be delivered in seven cargoes but expressed concern that the current pump price of petrol did not reflect market realities.

“The pump price today is not market reflective. NNPCL is the sole importer of PMS in the country, which is abnormal. We should be coming to a situation where the free market determines prices,” he said, stressing that market forces should drive fuel prices, rather than any single entity.

He clarified that NNPC’s role as the sole importer of petrol was not a deliberate decision by the company but a response to market conditions.

“Let me put it in proper perspective, NNPC is not a regulator. We didn’t put ourselves in the position of sole importer. We don’t determine who plays in the market. We decided to come in when others reduced their participation. It is not about us wanting to be monopolists,” Segun stated.

He explained that achieving a stable fuel supply and price would require perfect market conditions, including a more liquid foreign exchange market.

“Market conditions need to be perfect, and there needs to be FX liquidity,” he added, hinting that broader economic reforms might be needed to resolve the fuel pricing dilemma.

It was learnt that NNPC had been working closely with private refineries, such as Dangote, to ensure a steady supply of crude oil for processing.

“Once Dangote refinery begins the rollout of PMS and we at NNPC commence lifting, we will communicate the details,” NNPC spokesman, Olufemi Soneye, stated.

However, a Presidency source, who spoke on condition of anonymity because he was not authorized to speak on the matter, told The PUNCH that Dangote and not the NNPC would determine the price of the product, insisting that the refinery would not sell below the cost price.

“It’s a private business, Dangote will determine the price of the product based on market realities,” our source said.

“The Federal Government has already intervened by asking NNPC to sell crude to Dangote in naira. So far, 30 million barrels of crude oil have been supplied to Dangote. Between now and October, Dangote’s refinery will receive 17.8 million barrels of crude from the Federal Government, in addition to the 30 million barrels already supplied.

“The Federal Government stated that going forward crude should be sold to Dangote in naira to alleviate the pressure of seeking foreign exchange. This also allows him to sell to marketers in naira. How else can the Federal Government intervene?

“Dangote claims that the Federal Government will determine his price, he is being economical with the truth. He certainly will not sell below his cost price.

“The only role of the government as a regulator is to ensure that businessmen like Dangote do not take undue advantage of Nigerians. The government will also ensure product quality and prevent Dangote from setting arbitrary prices. By implication, the government will not allow him to set arbitrary prices.”

Shettima intervenes

The Minister for Petroleum Resources, Heineken Lokpobiri, expressed hope that there would be availability of petrol at the weekend.

He said this following a meeting with the Vice President, Kashim Shettima, as well as the Managing Director and Chief Executive Officer of the Nigerian National Petroleum Company Limited, Mele Kyari, and the Executive Director of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, Ogbogu Ukoha, at the State House on Thursday.

Lokpobiri said the meeting was at the instance of President Bola Tinubu, who, he said, was concerned about the hardship being faced by Nigerians

He urged Nigerians to desist from panic buying, stating that while the government was not fixing prices, the prices would stabilise as soon as the product was made available.

Lokpobiri stated, “What is important is for us to convey to Nigerians that the President is empathetic about what is going on in the country. He is concerned about the hardship of Nigerians, and that was why he directed the Vice President to call this meeting, for us to reflect on what is going on in the country.

“What is important is that products are available in the country, and we believe that between now and the weekend, there will be availability of products across the length and breadth of the country.

“The price could be high in some other areas, much higher in some other locations, and in some locations, much more than you know in other areas. But we believe that by the time there is availability of products across the country, the price itself is stabilised.”

He added, “What is important is that the government is not fixing prices. This sector is deregulated. And we believe that with the availability of products, the price will find its level. And this is important for Nigeria to know.

“There are enough products in the country to be able to meet the demands of Nigerians; there should be no panic buying. And we also believe that Nigerians need to know that the government is not fixing prices. That is what I want to convey to Nigerians,” he said.

Executive Director, NMDPRA, Ukoha, while speaking with State House correspondents, stated, “All regulatory efforts are now geared towards stabilising supply, with a resultant impact that it will be positive also on the stability of price”.

“To that objective, the regulator is ensuring that there are increased operating hours from all loading depots, vessels are being cleared promptly, and extended hours where safety can permit, for truck outs as well.

“More important also is the reinforcement of the support being given to local refinance, because with increased production from them, indeed, like the minister has said, there will be higher supply, which will stabilise the price. That’s the effort that the regulator is making.”