Nigerian fuel marketers head towards obsolescence as local refining picks up

Nigerian oil marketers are set to potentially lose around N14bn ($8.7mn) following 650,000 barrels per day (bpd) Dangote refinery’s decision to cut petrol prices last week, according to The Punch.

New industry data gathered by the publication shows that the standard landing cost of a litre of petrol is now N33.33 ($0.021) higher than the revised ex-depot price announced by Dangote – which could see marketers losing an average of N466.62mn ($290,680) per day and N13.998 ($8.7bn) per month.

With such a disparity between Nigeria’s fuel traders, market dynamics look likely to shift in favour of local producers – eventually cutting out fuel importers entirely.

Despite an overall negative outlook for importers, The Punch noted that financial losses incurred this month were significantly less than those incurred in March, when marketers were losing around N2.5bn ($1.5mn) per day and N75bn ($46.7mn) per month due to price fluctuations.

Industry stakeholders have commented on the growing gap between importers and local refiners, noting that the phenomenon could see a significant change in Nigeria’s petroleum supply chain with Dangote refinery taking charge on pricing and asserting dominance over its competition.

In an interview, national publicity secretary of the Independent Petroleum Marketers Association of Nigeria Chinedu Ukadike sympathised with marketers who would soon be forced to sell their existing stock at significantly lower costs.

“It is a good development for Nigerians; however, marketers with the old price stock will have to lose billions of naira. It is affecting marketers, but based on the naira-for-crude, the effect must be reflected in the pump price,” he said.

Similarly, The Crude Oil Refinery Owners Association of Nigeria (CORAN) also reported this week that fuel importers could soon be forced out of business if they were unable to adapt to Nigeria’s growing domestic refining sector, according to the Nigerian Observer.

The organisation released its statement as a warning following the emergence of tensions after the Federal Government opted to reinstate the naira-for-crude deal after weeks of deliberation amid significant opposition from the policy’s detractors – who consist mainly of the country’s largest fuel importers.

Commenting on the criticism, CORAN publicity secretary Eche Idoko remarked that any criticism – particularly from the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) – stemmed from fears that an increase in local refining would push their mode of business towards obsolescence.

“They’ve built an entire business model around importing fuel, and functioning local refineries challenge their relevance,” Idoko said, adding: “It’s like a man who stores water in drums; he wouldn’t want the pipes to start running”.