The federal government have sanctioned a new system that enables Petroleum marketers to obtain Premium Motor Spirit (PMS) straight from the Dangote Refinery, avoiding the Nigerian National Petroleum Company Limited (NNPCL). This change signifies that the NNPCL will renounce its exclusive role as the refinery’s only fuel buyer. Wale Edun, the Minister of Finance and leader of the Naira-Crude Sales Implementation Committee shared insights on this innovative strategy and its impacts on the local oil industry. Edun stated that this initiative directly responds to a mandate from the Federal Executive Council (FEC) to enhance the domestic production and distribution of crude oil and refined goods across the country.
Also, the government aims to stabilise the petroleum market and reduce reliance on foreign currencies by transitioning to transactions conducted in naira. This will ensure that refined products are easily accessible for domestic use. During the recent review session of the Implementation Committee focused on Domestic Crude Oil Sales in Local Currency, which took place on October 10, Edun emphasised the advancements achieved since the launch of this sales strategy. This review was a segment of a continuous assessment aimed at evaluating how well the transition is functioning and the establishment of a deregulated market framework for PMS.
Removing NNPCL’s role will boost competition and improve market dynamics.
Moreover, the aim is to create a competitive environment that serves the interests of the local oil marketers and consumers. Edun stated that the updated system enables marketers to talk directly with the Dangote Refinery and various local refineries, independently establishing commercial conditions. This change intends to create a competitive environment that will improve supply chain efficiency, ensuring a reliable and steady distribution of petroleum products. Now that local PMS production is underway, Edun expressed optimism that this strategy would promote a more effective market, enhance product accessibility, and ensure market resilience.
However, the government is confident that eliminating regulatory limitations and taking NNPCL out of the middleman role will encourage competition and enhance favourable market dynamics in the long run. With marketers starting to buy straight from the refinery, this shift is anticipated to lower expenses and stabilise fuel prices nationwide. The Finance Ministry recently stated that the direct purchasing approach allows marketers to function more efficiently, aligning with the government’s overall strategy for the energy industry. The goal is to promote competition, eliminate challenges, and create a favourable atmosphere where market dynamics dictate pricing instead of centralised authorities.
Marketing companies voiced their optimism regarding the new policy change.
Nonetheless, permitting marketers to source fuel directly from the Dangote Refinery comes amid increasing demands from prominent industry organisations. Both the Independent Petroleum Marketers Association of Nigeria (IPMAN) and the Petroleum Products Retail Outlets owners Association of Nigeria (PETROAN) have voiced their discontent over their earlier lack of access to direct purchase arrangements. Both groups consistently voiced worries that their lack of direct access to the refinery was driving up fuel prices nationwide. They contended that the inability to purchase PMS directly from the refinery kept the pricing system inflexible and excessively high, placing an extra strain on consumers.
Following the recent policy introduced by the Federal Government, IPMAN and PETROAN have shared their hope that this new framework will decrease fuel prices. They anticipate that with direct purchasing, competition among marketers will be levelled, removing unnecessary intermediary stages and driving down the total fuel cost. These organisations expect that after the system is implemented, consumers nationwide will enjoy lower fuel prices at gas stations. While there is hope, the government admits that issues remain about the changing market conditions.
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Under Edun’s leadership, the Implementation Committee has committed to collaborating with stakeholders such as petroleum marketers and industry groups to ensure clarity and assistance during the sector’s transition to this new structure. The committee seeks to facilitate a seamless transition to deregulation and direct purchasing, preventing supply chain interruptions while preserving market stability. Finally, transitioning to direct procurement coincides with the federal government’s economic goals, which seek to promote domestic Manufacturing and strengthen the national economy. The emphasis is on utilising local resources and skills to reduce reliance on international markets and foreign currency.