The Dangote Refinery and the Nigerian National Petroleum Company Limited (NNPC) have reportedly made significant strides in their negotiations concerning domestic fuel supply. After three weeks of discussions, it has emerged that the NNPC is seeking to deploy a permanent monitoring team at Dangote's $20 billion facility to oversee operations as part of the agreement.
Aliko Dangote, President of Dangote Group, has consented to sell refined petrol from his 650,000 barrels per day refinery in Nigeria’s local currency, the Naira. This decision was disclosed by Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, during an X Space event hosted by Nairametrics and covered by THISDAY.
Edwin shared insights on how the NNPC intends to station a team of six to ten personnel at the refinery. This team will supervise production and facilitate the purchase of petrol in Naira, given that the NNPC will be supplying crude oil. This arrangement aims to enhance the monitoring of crude supply and processing, ensuring a consistent flow of Premium Motor Spirit (PMS) across the country.
Edwin emphasized that while negotiations are ongoing, critical factors such as crude pricing and the Naira exchange rate remain unresolved. He noted, "We are still in talks with the government about receiving crude in Naira, and discussions are ongoing. Some unresolved issues include the pricing of crude and determining the appropriate exchange rate for the Naira."
Despite the involvement of the government, Edwin admitted there are challenges, as Dangote has agreed to accept the arrangement, even if it leads to financial losses. "We understand that I am going to take a loss – because by the time we sell the product and convert it to dollars, the exchange rate may have worsened," he stated, highlighting the pressing need for foreign exchange in Nigeria.
In a puzzling twist, Edwin expressed concern over local traders seemingly boycotting Dangote Refinery's products. He noted that despite the refinery's capacity to produce affordable petroleum products, many traders are opting to import refined items instead. "I’m selling 2 to 3 percent to small traders who are willing to buy, while the rest is being exported," he shared.
Local oil marketers have voiced their grievances to President Bola Tinubu, claiming that the significantly lower prices set by Dangote are disrupting market equilibrium. Edwin highlighted the refinery’s potential, noting that it could produce up to 54 million litres of refined petroleum products daily, emphasizing that local crude supply inconsistencies compel the facility to rely on imports.
The Dangote Refinery is designed to meet 44 percent of Nigeria’s petroleum needs, with the remaining portion earmarked for export. Edwin reiterated the refinery's ethos, stating, “The whole purpose of doing this refinery in Nigeria was to utilize our local crude instead of exporting raw materials and importing finished products.”
Overall, Edwin's remarks reflect the complexities of Nigeria’s refining and fuel supply landscape, alongside the imperative for sustainable and profitable operations in light of local market dynamics and foreign exchange challenges.
