Petrol pump price may drop as Dangote, marketers sign deal
Dangote Petroleum Refinery and the Independent Petroleum Marketers Association of Nigeria have reached an agreement for direct product lifting.
The group claims that doing this will guarantee that petroleum is available to Nigerians at a lower cost.
Abubakar Garima, the National President of IPMAN, made this announcement at a news conference in Abuja on Monday after the association's National Working Committee meeting.
He clarified that IPMAN was required by the Dangote refinery to lift PMS, AGO, and DPK directly in order to forward the supplies to IPMAN depots and retail locations. A consistent and uninterrupted supply of PMS products at a reasonable price would be guaranteed throughout Nigeria thanks to this new agreement with the Dangote refinery.
After our recent encounter with Alhaji Aliko Dangote and representatives of his top management staff in Lagos, we are happy to state the following; Dangote Refinery has obliged IPMAN to lift PMS, AGO and DPK directly for onward supply to IPMAN depots and retail outlets. That this new arrangement with the Dangote refinery will ensure a steady and ceaseless supply of PMS products all over Nigeria, at an affordable rate for Nigerians also.”
On October 29, the founder of Dangote Industries Limited, Aliko Dangote, said the refinery held over 500 million litres of petrol, but added that oil marketers were not buying his product.
In a counter-response, IPMAN said its members had been unable to load petrol from the Dangote refinery for days. Garima said the association paid N40bn to the Nigerian National Petroleum Company Limited, but still cannot source the product – but the refinery said it has not received any payment from the IPMAN for refined petroleum products.
Speaking further at the briefing, Garima urged IPMAN members to support Dangote Refinery, citing backward integration benefits and positive impacts on Nigeria’s Foreign Exchange market.
Garima said he was certain that talks with Dangote would result in cheaper prices.
Given the enormous advantages of backward integration and the medium- to long-term effects it would have on Nigeria's foreign exchange markets, all IPMAN members should fully support the Dangote refinery.
In order to ensure additional job opportunities in Nigeria and to demonstrate their full support for President Bola Tinubu's Renewed Hope Agenda, he continued, "IPMAN members nationwide should rely on the Dangote refinery and Nigerian refineries for their white products."
Kelvin Emmanuel, an energy specialist, commented that the new deal will remove the NNPCL's finance and margin expenses.
"What's encouraging about this news is that NNPC's letter of credit as financing cost ($28 per metric tonne) that is passed to IPMAN — controlling 30,000 retail stations and their margin ($26.48 per metric tonne) will be removed.”
The IPMAN president also stated that the association is preparing for a smooth transition to nationwide CNG refill stations, as it is currently in negotiations with the presidential CNG initiative.
“On CNG, I would also like to call on all our members at IPMAN to begin to put all types of machinery in place for a successful transition of the Federal Government’s plans to initiate CNG refill stations in all our outlets. Truly there is no doubt that CNG has the potential to rejuvenate our economy for a better life for Nigerians, and IPMAN is ready to give her all to support the CNG initiative.
“IPMAN is also calling for a partnership with the Federal Government of Nigeria to hasten the quick success of the CNG initiative for Nigeria. We believe that for the CNG initiative to succeed there must be a credible partnership between IPMAN and the PCNGI, without which Nigerians would not have ready and near access to CNG outlets.”
This partnership between Dangote and IPMAN is expected to increase efficiency, affordability, and economic growth for Nigeria’s petroleum industry. This move is expected to eliminate middlemen, reduce costs, and ensure steady supply.
Early this year, the Dangote Refinery said it would supply fuel to about 150,000 retail outlets operated by oil marketers.
In his remarks, the chairman, Board of Trustees of the association, Aminu Abdukadir, said that IPMAN must remain committed to providing the retail stations and funds to ensure that products are delivered to consumers.
“The business of making money without doing anything is over with the deregulation of the sector. For IPMAN to survive, it must provide the filling stations, the money, the trucks, to provide this commodity to motorists,” he said.
The currency rate, logistical effectiveness, and cost bargaining power based on volume purchased are some of the major factors that affect the final landing price, according to Clement Isong, Executive Secretary of the Major Energy Marketers Association of Nigeria.
In a conversation with our correspondent on Monday, the ES stated this in reaction to the anticipation of a drop in gas prices after landing costs dropped by 20.34% to N971.57 per litre.
He pointed out that rather than basing their prices on the daily spot price, oil marketers base their prices on the average cost of importing petrol over a 30-day period.
"As you can see from our bulletin, there isn't a single landing price for the entire nation," Isong stated. What we're saying is to give an idea of the landing pricIf if you land 38,000 metric tonnes into ASBM in Apapa, this is the landing price. That’s what we are saying. If you land 100,000 MT, or 80,000 MT into Pinnacle, the landing price will be lower. But there are only two places where the landing price will be lower due to economies of scale. If you land in the majority of the country, the depots and facilities take less. So, if you land it into another place in Lagos, the landing price will be higher. It won’t be N971 per litre. It can be as close to N1,000.
“So, the landing price is in function of how much you got your exchange rate, logistics and your negotiating power based on what volume bought. Some marketers are landing below N917. But the vast majority of people who don’t enjoy the benefits of economies of scale will land at significantly above that. What this teaches is that it is a free and open market. It’s how you buy that you sell. There is no one price. It is a function of the draft of the vessels that you land the product. It’s a function of how much product was bought. It’s a function of what rate of exchange was used to buy products. The exchange rate that we have used is the central bank rate. So, if you have the central bank rate, then you will not land at that price but if you to the black market, the price will be higher.
According to the legislation, our depots are only allowed to hold merchandise for 30 days. Since you are selling based on the average cost of your tank, it makes no difference that the spot market has increased. Since we are selling based on the average cost in your tank, it makes no difference if the price has dropped to N971. What was the average cost of everything in the tank and how much did you purchase? It's the going rate. There is also a range in the market pricing. Depending on your level of efficiency, it moves. And I believe that the exchange rate is the most crucial factor for us.
