2 months ago
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THE Federal Government’s announcement that Dangote Refinery will commence the distribution of petrol from Sunday partly clarifies the despair and confusion trailing the refiner’s entry into the energy market.
Nigeria has been enmeshed in petrol scarcity for over two months amid record prices and bewildering signals from the government, the NNPC Ltd and the refinery. This had dampened the initial excitement that followed Dangote’s September 2 announcement that it had started producing petrol.
The NNPC hiked petrol prices by 66 per cent the same day, citing its inability to continue footing the petrol subsidy bill that had drilled a N7.8 trillion hole in its books. NNPC stations increased pump prices from N568 and N617 per litre to N855 and N897/l, yet Nigerians are still queuing for petrol.
The inconvenience, productive man-hours lost, and further price escalation have worsened the arduous cost of living crises imposed by high petrol prices on Nigerians.
Food inflation has topped 40 per cent and manufacturers fear higher petrol prices would escalate production costs that could force many out of business.
Heineken Lokpobiri, Minister for State Petroleum Resources (Oil) said that the industry had been deregulated and that the government was not fixing prices. Days earlier, Aliko Dangote had said on September 2 that the Federal Executive Council was working on a new pricing arrangement for petrol produced from the refinery. He said that the NNPC would be the sole off-taker of petrol from the plant.
The NNPC, which holds a $1 billion stake in the refinery, went in the opposite direction. It said it would not buy Dangote fuel unless the price offered was lower than that in the international market. It stressed that Dangote was free to sell to any other entity on a willing-buyer, willing-seller basis. Dangote’s management, which had accused oil marketers of boycotting the refinery, said it would export products if it could not find buyers locally.
There were fears that the unseen forces that have conspired to ensure that Nigeria remains perpetually dependent on fuel imports appear to be winning in the obnoxious game of intrigues.
It therefore gives comfort that an agreement has now been reached between Dangote Refinery and the NNPC to begin petrol supply to a product-starved market with assurances of crude feedstock supply to the refiner by the national oil company. With this, petrol scarcity must stop.
Zacch Adedeji, executive chairman of the Federal Inland Revenue Service representing Wale Edun, the Minister of Finance, said loading of the first batch of petrol from the Dangote Refinery will commence on September 15.
The arrangement is that the NNPC will supply about 385,000 bpd to the Dangote Refinery starting from October 1 to be paid for in naira. In return, the Dangote Refinery will supply petrol and diesel of equivalent value to the domestic market, to be paid in naira. All associated regulatory costs to the Nigeria Ports Authority, Nigerian Maritime Administration and Safety Agency and others would also be paid for in naira.
The minister clarified that NNPC will be the sole off-taker of petrol for now while the refiner was free to sell diesel to other marketers contrary to NNPC’s earlier claim. Some reports suggested that the NNPC would sell fuel to marketers at N765.99/l and would import a shortfall of 15 million litres to meet Nigeria’s daily demand for petrol estimated at 40-50 million litres a day. The current prices might remain.
What was not addressed is the state of the NNPC’s four refineries and when they will start producing fuel after lying comatose for 28 years and over $20 billion spent to revamp them.
But the refiner’s potential must be harnessed to the maximum, especially in saving foreign exchange and catalysing economic growth.
