NNPCL, Dangote Refinery and the Price of Petrol

Loading of petrol from Dangote Refinery

Published By: Kazeem Ugbodaga

By Suleiman Adamu

When the news broke last week that an agreement was now in place that would see to NNPCL loading petrol from the Dangote Refinery, it came with a mix of joy and relief for some of us. Whereas the question of pricing was dominant in public discourse at the time, I didn’t think it was that important an issue, as it was obvious that given the fact that the price from Dangote was going to be above the current retail price, leaving the government with the options of either approving a special FX rate, having crude sold at a discount or pushing the burden onto NNPCL to continue to carry the burden, either way subsidy built in, to be able to maintain the current price regime.

That was the backdrop to yesterday when trucks from NNPCL lined up at the Dangote Gantry to load petrol. At the event, Arise TV Reporter, Tokunbo Oyetunji, had a live interview with Devakumar Edwin, Dangote’s Vice President, Oil and Gas on a range of issues. All had gone well with the interview until Oyetunji raised the issue of the price at which petrol was sold to NNPCL. A voice from the background pushed against that line of questioning, stopping Devakumar Edwin from responding to the question. The Reporter was forced to move on to another question.

That was quite strange, given what had been playing out in the public space, with all sorts of speculation about the price petrol was expected to sell, following the commencement of production by the Dangote Refinery. Earlier in the day, Olufemi Soneye, Chief Corporate Communications Officer of NNPCL, had debunked different claims in the media that the company bought Petrol from Dangote at N1,300 or N760. He said, “We successfully loaded PMS at the Dangote Refinery today. The claim that we purchased it at N1,300 per litre or N760 is incorrect. For this initial loading, the price from the refinery was N898 per litre. The price is determined by market forces. It’s a deregulated market. I can also confirm, in response to inquiries, that we will receive 16.8 million litres.”

So, with heightened public interest in the matter and conflicting claims being bandied, Journalists were eager to have clarification from Dangote Refinery. It thus came as a surprise that the company chose to pass on the opportunity offered to set the records straight. Even stranger was the statement that came from Anthony Chiejina, Group Chief Branding and Communications Officer at Dangote Refinery, later in the day which he said was in response to the claim attributed to “NNPCL spokesperson, Mr. Olufemi Soneye, that we sell our PMS at N898 per litre to NNPCL”. The claim, he said, was misleading and mischievous. But the statement only stopped at disputing the claims, it fell short of stating the price at which the product was sold to NNPCL.

That must have prompted the decision by NNPCL to release a statement today, doubling down on its original claim and sharing with the public the “estimated prices of Premium Motor Spirit (PMS), also known as Petrol (obtained from the Dangote Refinery) in its retail stations across the country”.

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NNPCL made it clear that “in line with the provisions of the Petroleum Industry Act (PIA), PMS prices are not set by Government, but negotiated directly between parties on an arm’s length”. It also made the confirmation that it is paying Dangote Refinery in USD for September 2024 PMS offtake, as Naira transactions will only commence on October 1st, 2024 while assuring the public that in case of a dispute over the quoted pricing, it will be grateful to pass on in full any discount that might come from the Dangote Refinery to the general public.

The statement from NNPCL is categorical and affirmative, firmly putting the ball back in the court of Dangote Refinery. It is interesting and commendable that this level of transparency is on display by NNPCL which is widely criticised for opacity in its operations. Truth be told, while that accusation might hold for NNPC in the past, the level of transparency that the Company has displayed in the last few years, releasing its Annual Reports and audited statement of Accounts from time to time is there to see. That has drawn commendation from agencies and other organisations that monitor the industry.

Some have said that Dangote does not owe anyone an announcement of its price, as it is not a public company.  Some have introduced the red herring of NNPCL not delivering on its refineries. Can we not have each conversation within its context? What has putting evidence out to support your claim, as a seller, that the price put out by a buyer is misleading got to do with its refineries presently undergoing rehabilitation not functioning?

While it is legitimate to criticise the NNPCL for not delivering on its refineries on schedule, sight might have been lost of the peculiarities and challenges that came with the task of rehabilitation, which many confused with Turn-around-maintenance, during the COVID and the immediate post-Covid period, which have led to difficulties with meeting up with schedule by the Contractors. The same factors were largely responsible for the shifting in the date of commissioning by the Dangote Refinery at different times. Biodun Sowumi, an Energy Expert, who spoke on the matter this morning assured that the time lag between mechanical commissioning and commencement of production, as seen with the Port Harcourt Refinery, is not unusual.

On the issue at hand, NNPCL has done well laying down the marker in terms of transparency, one can only hope that Dangote Refinery will take a leaf from that and open up its pricing template so that Nigerians can come to a full understanding of what is going on in the industry. Over the years, NNPCL has become a beast of burden for Nigeria, taking responsibility for subsidy or under-recovery to ensure that there is energy security. If the Company is allowed to function fully as contemplated under the Petroleum Industry Act, and it can sell products at market-reflective prices, a lot of the burden it has carried will be lifted off its back. The Company will be able to engage more productively in the upstream sector, greater transparency will ensue, and the industry and the country will be better for it. Dangote Refinery will do well to be more transparent so that Nigerians can fully benefit from the advent of local refining of crude oil, not only in terms of the availability of products but also affordability.

Suleiman Adamu writes from Lagos.