Amidst ongoing debate over pricing, importation, and refinery operations in Nigeria’s downstream petroleum sector, industry stakeholders continue to grapple with market volatility and regulatory dynamics.
Olufemi Adebayo Adewole, executive secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), in this interview on a TV programme discusses pressing issues facing marketers, the realities of importation, and his take on Dangote Refinery’s capacity and conduct. Experts by Josephine Okojie-Okeiyi.
There have been issues around petroleum product pricing and the challenges depot owners are facing. How have businesses like yours been coping?
The pricing of petroleum products is largely determined by the feedstock price of the crude that the refineries refine. Other factors affecting pricing include the refinery’s cost and margins, logistics cost and margins, the retail cost and the depository cost.
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All this put together is what builds up into the price which the customer buys at the last mile, which is at the retail station.
Cutting through these segments, the efficiency of any operator determines how competitive the marketer is. This helps us in the sector to ensure that we give the customer the best price possible, which is what we preach at DAPPMAN, in terms of depot operations.
Times are tough, depots and equipment are ageing, and the cost of replacing them is quite humongous. Nonetheless, we’re trodding on. For us, our goal is to ensure that Nigerians have access to the cheapest price for the quality of product that they deserve.
Are there concerns of a possible monopoly in the downstream petroleum sector?
It’s what we can term as a clear and present danger. Right now, we have a 650,000-barrel capacity refinery; this capacity alone gives the refinery the edge over all others.
It can manipulate prices, it can dictate prices, and it can get what it wants. So, it’s a clear and present danger for us, and we would rather not have it that way.
The good part, however, is that we have the regulators who have been doing fantastically well since they came on board.
They are checking to ensure that no organisation deviates from the provisions of the PIA, which ensures that it’s a free market and many players can come in and play in the system, and anything that goes towards a monopoly is checked.
The fear of monopoly is real, and we are working with other stakeholders and the regulators so that this can be nipped in the bud.
The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) President talked about a consumption capacity of around 46 million litres. Can the Dangote Refinery supply that on a daily basis, and on the other hand, can we stop importing petrol products at this time?
On the issue of capacity, I cannot speak about that right now. But the regulatory authority’s Chief Executive, in his recent presentation at the state villa, stated that the Dangote refinery is not meeting the reduced local consumption volume.
Private depot owners have been doing the work and bridging this gap and meeting the needs of Nigerians, and we will continue to do that.
In terms of importation, halting this will create chaos in the country. I’m not saying it cannot be stopped, but that we can be thought of as a long-term project and in phases. Before you do that, you must ensure that there is adequate local production and not just from one source.
Prospects who have been given the letter to construct should be encouraged to complete their project. When these prospects do, you have several sources of products for depot owners or any other marketer to sell to the public.
In addition, FCCPC and NMDPRA have been doing a good job, but they must continue to do their job so that they ensure that there’s a level playing field for everybody in the system.
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Do we have that space for a level playing ground now for competition, considering the provisions of the PIA?
We have the space, and the competition is there. We will continue to encourage other people to come into space. NMDPR has licensed quite a number of refineries and has given them letters to operate, and they are already operating.
Those who have not come on board, we’re looking up to them to complete their refinery, as the space is wide for more entries. So, the competition, and the opportunity for competition, is there, and we expect more people to come in.
If you were to advise the government, what steps should be taken to ensure stability in the petroleum supply chain?
In-country production should be ramped up because we need to have more sources of getting the product. It is not the primary will of the depot owners to import; we would rather buy locally and sell to Nigerians, but the opportunities are limited.
Dangote refinery, in this context, prefers a selective approach that chooses a few marketers and deals through them, and it prefers the gantry supply. But we are depot owners. We pick in bulk. We are picking 15 – 25 metric tons. So, if the portal is open and we are allowed to load our vessels, then it’s a lot easier for us.
We have depots all over the country, spread all over the coastal areas. So, all these depots are ready and willing to pick from Dangote. But is Dangote ready and willing? We’ve had several meetings with Dangote Refinery at the highest level of their management. We’re still talking with them. So, it’s not yet closed, but we want a situation in which we can pick from the refinery at the best possible price without being shortchanged.
I’ve heard in many cases that some marketers sometimes get imported products that are in some ways cheaper than what they get in the country. When that happens, where do we stand as consumers?
The aim of DAPPMAN is to ensure we give customers in all parts of the country quality products at the best price. Wherever we can source the product, we will get it for them.
The Petroleum Industry Act (PIA) allows us to import, and when people argue, “Why are you importing? Why are you not patronising the local refinery?” The reality is that we want to patronise the local refinery, but is the local refinery willing to give us the product? If we import cargos at a cheaper rate, we will sell to Nigerians at the cheaper rate.
It’s our pride that the Dangote refinery is up and running. We want to work with Dangote, but we are also not going to keep losing money because the bottom line is that we are in business.
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Are we making progress in regard to modular and NNPC refineries? Have marketers been able to get supplies from that front?
The NNPC refineries, both the revamped Port Harcourt and Warri, are not yet optimally producing PMS; they are producing naphtha. Our members will not go to them for now, but where we can get the product is Dangote refinery and we are willing to work with Dangote refinery, we are willing to buy from Dangote refinery, but if we don’t get the product from Dangote refinery, the PIA allows us to import which is what we’ll go for.
Considering the crude oil market, what’s your outlook for the entire industry?
The current budget was premised on $75 per barrel revenue and a production level of 2.06 million barrels per day, and we are already below par.
The government must be proactive and pragmatic in deciding and realigning its priorities and programs, as whatever shortfall is experienced is going to affect forex earnings, development projects, among others.
