Dangote alone can’t meet Nigeria’s fuel demands – Marketers insist

Major oil marketers have insisted that the Dangote Petroleum Refinery, despite recent sharp price reductions and growing domestic output, cannot on its own meet Nigeria’s petrol supply requirements, warning that dependence on a single source is already creating issues across the downstream market.

The Executive Secretary of the Major Energies Marketers Association of Nigeria, Mr Clement Isong, said this while responding to questions on the impact of Dangote refinery’s recent gantry price cuts from about N828 per litre to N699 per litre, which have driven pump prices down to around N739 per litre at many MRS filling stations.

Isong said all MEMAN members currently purchase petrol from the Dangote refinery but stressed that supply constraints, logistics challenges, and timing issues make it impractical for the refinery to be Nigeria’s sole source of supply.

Isong said the Nigerian Midstream and Downstream Petroleum Regulatory Authority planned well for the Yuletide season by granting licences for importation.

“So many of my members, all my members, buy from the Dangote refinery. They all buy from him; it’s just that if everybody in Nigeria is buying from him, then from time to time he’s unable to meet their needs – what they want, when they want it, and how they want it – then they have to find alternatives.

So some of them import, and some of them buy from those who import,” he said.

He explained that marketers’ supply needs vary widely, noting that reliance on a single refinery operating from one location naturally creates bottlenecks.

“It’s almost impossible for a single (petrol) source to be able to meet people’s needs when they want it, how they want it, when they want it. Sometimes they want it by boat in certain quantities; sometimes they want it by loading gantry in certain quantities. You go and line up with other people there. The circumstances of buying from a single source or a single location naturally make it very difficult to be able to meet all your needs,” he added.

According to him, the supply challenges have already led to dry filling stations among some major marketers, despite the general availability of petrol in the country.

“I was looking at some of my member stations I went to today (Monday); some stations are dry because of the challenges they are facing with the supply situation. But they all buy from Dangote. They all buy from him when they can and how they can. So, my members have some stations that are dry,” Isong told our correspondent.

Asked if the stations became dry because they could not get sufficient stocks from the $20bn refinery or from importers, he replied, ”No, it just depends on the situation. It’s quite chaotic right now. So if you get it wrong, if you depend on a single source, you need to go and buy from somebody else.

“They will go and buy from other people. Some of them import, but if they’re not importing and you were unable to get from Dangote yesterday, the situation will be dry, unless you go and buy from an importer or somebody else who bought from Dangote, that is, from a third party. And that will come at a premium. It’s not so easy to supply your stations right now with the current situation we find ourselves in.”

Having described the current market situation as chaotic, he noted that pricing volatility has made supply planning extremely difficult for marketers.

Despite reports of dry stations in some locations, the MEMAN executive dismissed fears of an impending fuel scarcity, insisting that Nigeria currently has excess petrol in the system. He added that more petrol is coming into the country.

He explained that many marketers are deliberately avoiding large-volume purchases because of the risk of sudden price crashes, which can wipe out margins.

“There’s a glut. There are excess products in the country. And there will continue to be imported products coming in. The authority planned well for the season; it is true that there are products everywhere. It’s just that you need to be able to buy at a good price for your station. But there are excess products in the system.

“But people are being careful because of the price. Nobody buys in large volumes. So, you know, there’s an advantage to volume purchase, to bulk purchase. The bigger you buy, the lower your unit cost. But if you buy in bulk now and the price crashes, then the bigger the amount of money you lose,” he warned.

According to him, losses are being recorded across the value chain, including by the Dangote refinery. “Everybody is losing money. Even the producer himself has confirmed it. You heard him say that he is losing money,” Isong submitted.

Last week, the Dangote refinery shocked depot owners and marketers when it slashed the gantry price of petrol by N129, from N828 to N699 per litre. During a recent press briefing, the President of the Dangote Group, Aliko Dangote, said he had information that some marketers planned to keep pump prices high despite the reduction in the gantry price.

Consequently, Dangote vowed to enforce the new price regime, with MRS selling petrol at N739 from last week Tuesday. The PUNCH reports that as more MRS filling stations in Lagos and Ogun states join in dispensing the Premium Motor Spirit (petrol) produced by the Dangote Petroleum Refinery at N739 per litre, motorists have started boycotting retail outlets that sell the product at higher prices.

This has compelled other stations to lower their petrol prices by about N100 per litre, an amount that is far below their cost of purchase, indicating the severity of the price war in the downstream oil sector.

Speaking with our correspondent, the spokesperson of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike, stated that any marketers who refuse to reduce prices would lose their customers, saying price determines patronage.

“We are in a situation where competition can be determined by price. Patronage will be determined by pricing. Nobody is against you; nobody is regulating you. You will regulate yourself. The market will regulate itself. The time has gone when people were queuing at NNPC filling stations. Wherever the fuel is cheap, that is where the marketers go. So, we are in a price war. Demand and supply determine the price.

“Once Dangote has reduced the gantry price to N699, marketers will dive towards competitive pricing whereby they can retain their numerous customers; if not, interest from banks would be ‘eating’ your capital,” Ukadike said.

He announced that the association has entered into a partnership with the Dangote refinery. “We have formed a partnership already because Dangote has invited IPMAN for the first time. The major marketers have failed Dangote. He has now realised that only the independent marketers are the strategic partners that can evacuate his petroleum products as quickly as possible. He said IPMAN should come and pick up the products. He said it clearly. And since that time, we have provided tremendous patronage,” Ukadike disclosed.

Meanwhile, the Dangote refinery recently said it has the capacity to supply the daily petrol needs of Nigeria. President of the Dangote Group, Aliko Dangote, said the refinery currently supplies 50 million litres into the local market daily. He accused the NMDPRA of issuing “reckless” licences when his tanks were full.

Officials of the plant backed their boss, insisting that the refinery has the capacity to meet local fuel demand nationwide.(Punch)