Why local marketers are not patronising Dangote refinery

• Only around 3% of regional oil marketers have used the Dangote refinery since it started churning out fuel earlier this year
• As a result, vice president of Dangote Industries Limited said the refinery export 97% of its refined goods
• Marketers argued the Dangote refinery management's trade policy may have adversely hindered patronage

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

Despite Dangote Petroleum Refinery having started producing diesel and aviation fuel early this year, just roughly 3% of local oil marketers have patronised the facility.

Marketers said Dangote refinery management's trade policy may have seriously hampered patronage. Photo Credit: Dangote Refinery
Source: UGC

The Dangote refinery was compelled to export 97% of its refined goods, according to Devakumar Edwin, vice president of Dangote Industries Limited, because of the poor patronage.

He said during an X space organised by Nairametrics,

“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.”

How marketers react

According to some marketers who spoke with BusinessDay, the Dangote refinery management's trade policy may have seriously hampered patronage.

They claimed that the purported limit on loading diesel buyers at a minimum of 20,000 metric tons, or 5 million litres, has grown to be a significant obstacle.

They observed that the barrier makes it difficult, if not impossible, for local oil companies to purchase 10,000 metric tonnes from Dangote.

A senior executive in the downstream sector said,

“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.”“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.

More challenges

Oil dealers revealed that they had encountered difficulties with dollar payments and that payment for cargo offtake from the refinery needed to be made in Naira rather than US dollars.

One of the marketers said,

“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." “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 stated that local oil businesses have demonstrated sincere purpose and have continued to support the refinery well above the three percent indicated by the Group's vice president, despite all the obstacles resulting from Dangote refinery management trade rules.

“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.

NNPC Begs Dangote Refinery for Discount

Legit.ng reported that the Nigerian National Petroleum Company Limited (NNPC Ltd) has asked Dangote Refinery to lower the price of its gasoline.

Under the heading "Estimated Pump Price Based on Dangote Refinery Sept. 2024 PMS Pricing," NNPC broke out Dangote's retail gasoline prices by state and pledged to share any savings with Nigerians in order to lower pump prices.

Additionally, NNPCL affirmed that it is paying Dangote Refinery in US dollars for the PMS offtake in September.

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Source: Legit.ng