Rebuilding Nigeria’s fuel market: Addressing supply shortfalls and pricing realities

The recent controversy surrounding the Nigerian National Petroleum Company Limited (NNPC) and the Independent Petroleum Marketers Association of Nigeria (IPMAN) has sparked widespread debate. IPMAN’s accusations against NNPC Limited’s pricing strategies have raised significant questions about the national oil company’s role in the pricing and distribution of petroleum products. While these claims have stirred public discourse, a closer examination reveals a more intricate reality that underscores the need for collaborative solutions rather than misplaced blame.

At the heart of the debate is IPMAN’s assertion that NNPC Limited purchases fuel from the Dangote Refinery at below N900 per litre, only to sell it to independent marketers at inflated prices. However, this simplistic view overlooks critical supply chain challenges and the operational constraints facing both the NNPC and the Dangote Refinery.

NNPC Limited’s contract with the Dangote Refinery stipulates a daily fuel supply of 25 million litres. Unfortunately, actual deliveries fall far short of this target, with an average supply of only seven million litres per day—a mere 27 percent of the expected volume. This shortfall has led to fuel scarcity and the re-emergence of long queues at petrol stations. The planned Premium Motor Spirit (PMS) supply from the Dangote Refinery for the period from September 15 to October 6 was intended to be 540 million litres, yet NNPC Limited received just over 100 million litres.

The inconsistency in supply from the Dangote Refinery presents a significant bottleneck in Nigeria’s fuel distribution chain. While NNPC Limited is responsible for managing its relationship with Dangote, it is clear that the root of the problem lies in the suboptimal performance of the refinery, which has failed to meet its contractual obligations.

Nigeria’s downstream petroleum sector is now fully deregulated, allowing independent marketers the freedom to import petrol directly or purchase from the Dangote Refinery at negotiated prices. This shift promotes healthy competition, which has the potential to drive down prices and provide consumers with more stable access to fuel. IPMAN’s president, Abubakar Garima, has acknowledged that marketers now have the option to source products directly from the Dangote Refinery without needing to go through NNPC Limited.

In this new deregulated landscape, it becomes clear that NNPC Limited’s role has evolved. It no longer holds a monopoly on fuel supply, and independent marketers now have greater control over pricing and procurement. Rather than viewing NNPC Limited as the culprit, stakeholders should focus on addressing the inefficiencies within the Dangote Refinery and supporting the government’s efforts to improve local refining capacity.

NNPC Limited’s pricing strategies may not be flawless, but they are a reflection of market realities. In the face of supply chain disruptions, global price fluctuations, and infrastructure deficits, the company has made efforts to adapt to the new dynamics of the deregulated market. NNPC Limited has taken steps to foster competition by allowing marketers to negotiate directly with suppliers and set prices based on market conditions. Additionally, the company offers flexible payment terms, including a seven-day payment window and refund mechanisms for price adjustments, which provide some relief to marketers navigating a volatile market.

While NNPC Limited’s pricing approach may draw criticism, it is important to recognise the challenges the company faces in maintaining a steady supply of fuel in an environment fraught with logistical hurdles and global market volatility.

To truly fuel Nigeria’s economic growth, the focus must shift from blame to collaboration. The inefficiencies at the Dangote Refinery are a key factor in the current supply challenges, and government intervention is necessary to ensure optimal production and distribution. By enhancing the refinery’s efficiency and increasing its output, Nigeria can reduce its dependence on imported fuel and stabilise local supply.

Moreover, promoting competition by encouraging more independent marketers to enter the market will drive prices down and improve consumer access to affordable fuel. Investment in infrastructure, such as storage and transportation networks, is also crucial to address the logistical challenges that hamper the efficient distribution of petroleum products across the country.

Finally, fostering open dialogue between NNPC Limited, IPMAN, and other key stakeholders is essential. Through cooperation, these entities can work together to find sustainable solutions to the challenges facing Nigeria’s fuel sector. Rather than engaging in finger-pointing, the focus should be on building a more resilient, competitive, and transparent market that benefits all Nigerians.

Nigeria’s fuel sector is at a critical juncture. The challenges are clear: suboptimal refinery performance, supply chain disruptions, and market volatility. However, these issues are not insurmountable. By supporting NNPC Limited’s initiatives and addressing the inefficiencies within the Dangote Refinery, the country can create a vibrant and competitive market. Collaboration, investment in infrastructure, and open dialogue among stakeholders will pave the way for Nigeria’s economic growth and stability in petrol pricing.

Segun Oniyinde writes for the Concerned Citizens of Nigeria, a Non-Governmental Organisation which seeks to build bridges between government and the people.