Dangote Refinery Faces Uncertain Future: Local Market Dispute Could Lead to Export-Only Strategy

NNPC’s Refusal to Be Sole Buyer May Drive Dangote Refinery to Focus on Exporting Petrol

The ongoing dispute between Dangote Refinery and the Nigerian National Petroleum Company Limited (NNPC) has cast doubt on the future of local petrol supplies. The NNPC has declared it will not purchase petrol from Dangote’s facility unless it is priced below international market rates. This decision stands in contrast to earlier statements from Aliko Dangote, who anticipated an immediate rollout of fuel from his refinery once arrangements with the NNPC were completed.

The NNPC clarified that it would only fully offtake petrol if market prices exceed the current pump prices in Nigeria. The corporation also stated that domestic refineries, including Dangote’s, are free to sell directly to any buyer on a willing buyer-willing seller basis. This policy aligns with the deregulated nature of the petroleum market and signifies that the NNPC does not intend to act as the exclusive distributor for any refinery.

The controversy intensified following the NNPC’s adjustment of pump prices, which some argue undermines Dangote’s ability to offer competitive rates. The Muslim Rights Concern (MURIC) has suggested that these pricing changes aim to disadvantage Dangote’s refinery, but the NNPC counters that global market forces govern petrol pricing and that domestic refiners have the opportunity to sell at lower prices if current market conditions warrant.

Despite the refinery’s readiness to supply petrol and hopes to alleviate fuel shortages, the lack of a definitive agreement with the NNPC may force Dangote to shift focus to exporting its products. This development could mean that the anticipated reduction in petrol prices and improved supply might not materialize for the Nigerian market.

The Vice President of Oil and Gas at Dangote Industries, Devakumar Edwin, hinted at the possibility of exporting petrol if domestic buyers, including the NNPC, fail to engage with the refinery. This move would be in line with the current export strategy for aviation jet fuel and diesel, as Dangote’s refinery is prepared to export refined products to mitigate domestic market challenges.

Experts suggest that the government and NNPC should prioritize purchasing from Dangote to reduce reliance on costly imports. The Independent Petroleum Marketers Association of Nigeria (IPMAN) has expressed willingness to buy petrol from Dangote at any price, underscoring the market’s readiness to support the refinery despite the NNPC’s stance.

In conclusion, the ongoing negotiations and pricing disputes between Dangote Refinery and the NNPC have created uncertainty for the local petrol market. As the situation evolves, it remains to be seen whether Dangote will turn to export markets or find a resolution that supports domestic supply and pricing stability.