Dangote Partners Marketers to Secure Nationwide Fuel Supply

The Dangote Petroleum Refinery partnered with major fuel marketers to safeguard nationwide supply and reduce risks associated with a single-source system, the Major Energies Marketers Association of Nigeria has said.

Speaking during a MEMAN webinar on Tuesday, the association’s Chairman, Hubb Stokman, said the supply arrangement with marketers was designed to improve efficiency and address concerns around concentration risk in the downstream sector.

He noted that while Nigeria now has a large refinery capable of meeting most of its domestic needs, relying heavily on a single facility comes with inherent risks.

“I think that Nigeria is actually very blessed with having a refinery. Sometimes you forget, in a situation like this with the crisis in the Middle East, that having a refinery that can produce a large part, if not almost everything, that the country needs is a huge benefit,” he said, adding that Nigeria should count its blessings in that regard.

Stokman, however, added that the size and dominance of the refinery also necessitated deliberate efforts to spread supply channels.

“Now, one of the things is, of course, when you get a huge, mega refinery that can produce almost anything and everything that the country needs, it’s all concentrated in one place.

“So actually, this supply arrangement and selling to MEMAN members and other major marketers was mainly based also on making sure to address a little bit the risk of having one single big place to get all the products from, and also make it operationally efficient.”

He explained that the arrangement was also carried out in consultation with regulators to ensure it aligns with market realities and enhances distribution efficiency. “And I think they did that by talking also to the regulator to make sure what makes sense,” he added.

Stokman said the current global oil market volatility, triggered by the Middle East crisis, had reinforced the need for flexibility in supply arrangements. He said the crisis in the Middle East happened a couple of days after the purchase arrangement was communicated.

“And when the crisis happened, of course, everybody’s prices changed. It’s all a bit up in the air because it’s moving so fast. Don’t forget, the crisis in the Middle East is only two weeks old, and it happened basically a couple of days after this arrangement was communicated,” he said.

He noted that despite the volatility, the Nigerian market has so far responded positively because the arrangement was working. However, he warned that Nigeria needs to remain agile in a volatile environment in order not to be bogged down.

“So, I think so far, it’s been working. But I think we need to realise that in these kinds of fast-volatility environments, you need to remain agile.”

He warned against rigid approaches to market management, stressing the need for continuous adjustment in response to global developments. “I think that’s always the key thing. Don’t get bogged down in one way sometimes. But I must say, I’m very impressed with how the refinery is dealing with it and also the market,” Stokman added.

The MEMAN chairman further stated that Nigeria’s fuel pricing continues to reflect international market trends, as the deregulated system tracks global benchmarks. “The prices in Nigeria have followed, let’s say, import parity and the international market. So in that sense, I think the market has responded very quickly,” he said.

Speaking about the suspension of import licences, he added that supply security remains strong, with the regulator maintaining a needs-based approach to imports.

“I think what the NMDPRA does at the moment is very good. It (import) is scheduled on a needs basis. And I think that’s a very good approach, looking at the market and what is needed. The NMDPRA said at the beginning of March that the country had over 30 days of stock availability of PMS, which is actually, in a situation like this, quite a good position to be in from a supply security point of view.”

On the role of the Nigerian National Petroleum Company Limited, Stokman said the company remains critical to maintaining stability as a supplier of last resort.

“NNPC remains committed to its statutory role, of course, as a supplier of last resort, making sure the stability and continuity of supply of petroleum products across the country.”

Stokman expressed confidence that with both local refining and imports functioning within the framework of the Petroleum Industry Act, Nigeria can sustain an adequate supply. He added that the Nigerian market has shown increasing discipline in responding to shocks, reflecting gradual maturity since deregulation.

“I think the market is responding very, very fast and very disciplinarily. I think both the refineries, the NMDPRA, and the market players are all very, very disciplined in the way we do it,” he added.

Also speaking, a partner at Zeta Advisory and Consulting, Joe Nwakwue, stressed that Nigeria must deliberately promote a competitive, or “contestable”, market to prevent abuse of dominance by any single supplier.

He added, “We have a single refinery, 650,000 barrels, that is operational. So that risk is there. However, through regulatory action, the risk can be mitigated.” Nwakwue said allowing imports remains critical to sustaining competition and preventing price distortions.

“And that’s where I think a contestable market is important. So in practical terms, if that refinery knows that importers will bring in product and sell at a margin, its pricing will be influenced by that. But if that refinery knows that there’s no hope of getting product from anywhere else, then of course, there’s no way to regulate its behaviour.

“I think my personal view is that at all times, the only way today that you can have a contestable market is that you continue to allow imports,” Nwakwue stated.

On pricing, he noted that Nigeria is still exposed to global oil market volatility.

“The next question is, is Nigeria immune to fair price volatility? No, we’re not. As I said, domestic pricing is still import-quality pricing. So, irrespective of what the crude-for-naira deal says, we are still benchmarking Brent, and so that means whatever happens anywhere in the world that impacts Brent will be transmitted directly to the domestic market,” the expert stated.

He said there was a need to explore buffers within policies such as the naira-for-crude arrangement to reduce exposure to international price swings.

“I think that using the mechanism of the naira-for-crude, as I said, it’s until I see the agreements; I wouldn’t know, but I think you can build in buffers there, some discounts or things that can allow you to isolate the domestic refining from the vagaries of the international crude market.”

Nwakwue also raised concerns over policy inconsistencies, saying mixed signals from regulators could undermine market confidence. “I’m not aware that we have importation challenges. I think what we’ve had are uncertainties around policy and regulations. And I think that that’s what the regulator needs to clarify. People need to be certain,” he warned.

He cautioned that rising petrol prices could hurt economic growth if not carefully managed. “I think that if fuel price goes way into the N2,000s per litre, it’s going to affect economic growth. So the government should have an interest in ensuring that Nigerians don’t have to pay N2,000 per litre,” Nwakwue noted.

He, however, advocated a targeted and temporary intervention mechanism rather than an open-ended subsidy regime. “So somebody needs to model that and know what that threshold is. And then the government needs to design something; I don’t want to call it a subsidy, but that’s what it ultimately is. It’s a temporary measure that does not allow prices to hit the roof, where they will destroy the economy,” he added.