Dangote considers cutting petrol supply to importers

The Dangote Petroleum Refinery and Petrochemicals is contemplating halting the distribution of petrol to importers amid worries about the quality of products and the blending of imported fuel with the refinery-supplied petrol. The proposed action could commence as soon as this week, pending further discussions and last-minute changes, according to people familiar with the matter.

The immediate worry is that certain marketers may be mixing imported PMS with petrol obtained from the Dangote refinery before selling the combined product to retailers. This issue stems from the refinery's concern that such blending practices could complicate the identification of products directly sourced from Dangote from those blended or manipulated by external parties.

A senior official at the $20bn Lekki-based facility, who requested anonymity due to the absence of authorization to speak on the subject, expressed perplexity over investing in high-quality petroleum products for Nigerians only for them to be mixed with substandard imported items and subsequently linked to the refinery. The refinery has also expressed concerns regarding the lack of standard laboratories and adequate quality control infrastructure for imported petroleum products, particularly the ability to independently verify and certify the specifications of goods entering the Nigerian market.

Petrol prices near N1,400 as Dangote defends price hikes Subsidy removal reshapes Nigeria’s economy — Ex-Osun MP Dangote price hike pushes Abuja petrol prices to N1,300/litre The most recent development occurs just a few days after the Dangote refinery cautioned that escalating petrol imports were compelling it to export surplus stocks despite possessing adequate capacity to meet domestic demand.

The refinery reported that imported PMS comprised around 43 percent of fuel supplied into the Nigerian market in July, citing the persistent issuance of petrol import licenses as the source of uncertainty regarding domestic demand and compounding production and inventory planning difficulties. Dangote affirmed that it had consistently maintained sufficient stock and set aside product volumes to ensure a steady supply to the Nigerian market, but argued that retaining excessive inventories indefinitely became commercially unfeasible when unable to predict future import volumes.

"As a responsible energy provider, we have always aimed to maintain adequate reserves to meet local demand at all times. However, in an environment where substantial volumes of imported PMS continue to enter the market via licenses issued by the regulator, and where there is limited visibility on future import volumes, continuing to hold surplus inventory indefinitely becomes commercially unsustainable," the refinery stated.

The proposed restriction on sales to importers introduces a new aspect to the refinery's concerns, as Dangote transitions from emphasizing the commercial ramifications of rising imports to contemplating measures that would prevent marketers from procuring its petrol while simultaneously importing competing goods.