Inside details of why diesel traders bought less of Dangote products

Fresh findings have revealed why only about three percent of local oil marketers have patronised Dangote Petroleum Refinery since it commenced production of diesel and aviation fuel early this year.

Devakumar Edwin, vice president of Dangote Industries Limited, had on September 11, 2024, said due to the low patronage, the Dangote refinery was forced to export 97 percent of its refined products.

“The conglomerate of all oil marketers is refusing to buy from us. It is very strange that after putting up the refinery to supply the products locally, we have to export every diesel and jet fuel because they do not want to buy from us,” he said during an X space organised by Nairametrics.

However, some marketers who spoke with BusinessDay said some trade policies of the management of Dangote refinery may have constituted a serious hindrance to patronage.

They said the alleged restriction of loading to a minimum of 20,000 metric tonnes (equivalent of 5 million litres) per buyer of diesel has become a major road block.

They noted that it is difficult, if not impossible, for local oil players who wish to buy 10,000 metric tonnes from Dangote to do so due to the barrier.

“It means you need a lot of cash, which is a big problem, because most of the traders in the diesel business are relatively small-scale businesses who rely on credit to do business,” a senior executive in the downstream sector said.

“Dangote refinery restricted loading to 20,000 metric tonnes minimum and many marketers, who required lower volumes of 5000, 10,000 and 15,000 metric tonnes of any product (automotive gas oil or aviation turbine kerosene), were denied by Dangote refinery. Such marketers are seen as not being worthy of their attention.

“Marketers wanted to co-load their volumes but disparity in the time the product is required differs and Dangote refinery has refused to reconsider requests for the lower quantities. How do you then turn around to blame the same marketers for not patronising the refinery?” the executive added.

Oil traders said that they have been confronted with dollar payment challenges, disclosing that payment for cargo off-take from the refinery should not be in US dollars but in Naira.

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“The requirement to buy from Dangote refinery includes dollar payment, letter of credit and bill of laden. Local oil traders should have the option of paying in naira, which will reduce the pressure on the Naira. But as of now, this is not the situation,” one of the marketers said.

On the claim that low patronage by local marketers has forced Dangote refnery to export its products, the marketers pleaded for a review of the current policies.

“We are disadvantaged by the Dangote refinery policy of selling big parcels of products to international traders who then take such products offshore Lome and resell to Nigerian oil traders in small parcels and market terms that we are not used to,” a marketer noted.

He noted that “much of the diesel sold by Dangote refinery to big international players find its way back to Nigeria as most traders in Nigeria buy from Lome at a lower quantity and sell in Nigeria.”

The marketers said despite all the encumbrances arising from Dangote refinery management trade regulations, local oil companies have shown genuine intention and have gone ahead to patronise the refinery far beyond the three percent mentioned by the Group’s vice president.

“It is only the refinery’s management that can widen the scope of the patronage by relaxing all the policies that are not in the interest of the local traders,” an oil marketer said.

Documents sourced from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) showed that independent local marketers, including Asharami, MRS Oil and Gas, AA Rano, Rainoil, Prudent, NIPCO, Aym Shafa and Danmarna, among many others, have patronised Dangote Refinery over the past months, a development the marketers say reinforces their commitment to ensuring seamless access to petroleum products across the nation.