The Dangote Petroleum Refinery has taken a major step in transforming Nigeria’s fuel supply chain by partnering with the Independent Petroleum Marketers Association of Nigeria (IPMAN).
As part of this significant agreement, the refinery will supply 60 million liters of Premium Motor Spirit (PMS), commonly known as petrol, each week to IPMAN. This partnership, which could see the association receiving up to 240 million liters of petrol monthly, is expected to enhance Nigeria’s fuel distribution network and reduce reliance on imported fuel, a longstanding financial drain on the nation.
IPMAN, which oversees over 30,000 retail outlets and controls approximately 70% of Nigeria’s fuel retail market, views this agreement as a game-changer. Members will now be able to lift products directly from Dangote Refinery, bypassing middlemen and ensuring smoother operations.
According to Chinedu Ukadike, IPMAN’s National Publicity Secretary, this arrangement marks a significant shift for the association.
“We are going to off-take the product in millions of liters. Before now, most of the imported products in Nigeria were distributed through IPMAN,” Ukadike told The PUNCH. “So, we can off-take the products, no matter the millions of liters that are produced. Dangote has offered to give us over 60 million liters, depending on our patronage.”
The agreement not only streamlines distribution but also empowers IPMAN members to directly compete with other players in the market, including the Nigerian National Petroleum Corporation (NNPC). This development comes in the wake of IPMAN depositing N40 billion with the NNPC to procure products, funds that have not been refunded. Frustrations with such inefficiencies in the existing system likely influenced IPMAN’s decision to pursue a direct partnership with Dangote Refinery, which represents a more reliable alternative.
Ukadike further noted that the supply agreement would be scaled based on demand, with operations expected to commence before the end of November.
“The 60 million liters is to be given weekly. We can take and distribute it across the country once we start lifting the product from the refinery,” he explained. “We are finalizing discussions. Documentation is in process. Once they are sorted, we will off-take PMS from the plant. This is going to happen before the end of this month.”
To ensure transparency and efficiency, IPMAN has created a Special Purpose Vehicle (SPV) to handle product off-taking, replacing the previous system where individual marketers purchased smaller quantities. This change is expected to eliminate bottlenecks and ensure guaranteed funding for transactions.
As Africa’s largest refinery, Dangote’s operation is poised to reshape Nigeria’s energy sector. Economists believe the agreement positions IPMAN to better serve the market and potentially lower fuel costs.
“It’s also very interesting to note that IPMAN members with around 30k retail pump stations across Nigeria control about 70% of the retail market. If they pump 15 million liters of PMS daily to Nigerians, where is the phantom 55 million-70 million phantom consumption numbers coming from?” Kelvin Emmanuel, an energy expert, asked, pointing to inconsistencies in NNPC’s reported figures.
Emmanuel also criticized NNPC’s pricing inefficiencies, noting, “You can imagine NNPC structuring a Letter of Credit at $28 per metric tonne and passing down unknowingly the financing cost of N36 per liter to the consumer. Isn’t it the job of the regulator NMDPRA to stop it? This is what everyone that was off-taking petrol through NNPC as a third-party to a single buyer, was made to stomach.”
While this partnership represents a significant shift, concerns remain over the continued issuance of import licenses for PMS despite Dangote Refinery’s capacity to meet local demand. Experts have criticized this practice as economic sabotage, with Emmanuel labeling it a move aimed at undermining the refinery’s competitive edge.
“The Petroleum Industry Act is clear as daylight that if the local refineries have the capacity to produce and the output confirms this claim, the regulator is not supposed to grant import licenses to bring products to Nigeria. Clearly, some people are not happy with the arrival of Dangote Refinery within the sector,” Emmanuel observed.
The Dangote-IPMAN deal is expected to address many shortcomings in the current fuel distribution system while promoting transparency and efficiency. The agreement is expected to stabilize fuel supply and pricing across the country by ramping up local production. Analysts are optimistic that this development will ultimately benefit Nigerian consumers by fostering competition and reducing costs.
