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The Natural Oil and Gas Suppliers Association of Nigeria has issued a warning regarding the Dangote Petroleum Refinery's strategy to circumvent current distribution systems by supplying refined petroleum products directly to consumers.
They caution that this initiative could result in nationwide disruptions, long-term product shortages, and the breakdown of established supply networks.
The suppliers have requested the refinery to pause its plans and engage in further discussions before initiating direct distribution to end users, advising it to consider the experiences of non-operational refineries managed by the Nigerian National Petroleum Company Limited.
Additionally, they called upon President Bola Tinubu to step in, emphasizing that Dangote alone cannot sustainably manage the distribution of products nationwide.
The National President of NOGASA, Bennett Korie, made this statement during the association's Annual General Meeting on Thursday in Abuja.
However, a representative from the Dangote Group dismissed the dealers' concerns, labeling their stance as anti-Nigeria and asserting that Dangote's aim is to eliminate logistics costs related to petrol distribution across the country.
Billy Gillis-Harry, the National President of the Petroleum Products Retail Outlet Owners Association of Nigeria, expressed that Nigerians should refrain from celebrating the Dangote refinery's announcement as he supports the concerns raised by NOGASA.
On Thursday, petrol prices at depots surged by as much as seven percent, rising from N815 per litre on Wednesday to N870 per litre on Thursday.
The Dangote refinery, which has recently revealed plans to introduce 4,000 new Compressed Natural Gas-powered tankers for direct distribution of petrol and diesel to various large consumers while bypassing traditional depots and intermediaries, expects this initiative to launch on August 15. This programme, costing N720 billion, aims to enhance transportation efficiency throughout Nigeria and beyond, potentially saving Nigerians over N1.7 trillion annually and boosting 42 million Micro, Small, and Medium Enterprises by reducing energy costs and improving profitability.
The refinery indicates that this strategic initiative is part of a larger commitment to cut logistics costs, improve energy efficiency, promote sustainability, and support economic growth in Nigeria.
Korie highlighted that if existing retail outlets were driven out of business due to Dangote’s direct distribution, reviving the supply chain in the event of a refinery disruption would be challenging.
He further noted the unsustainability of managing refining, distribution, and retail through filling stations as a single operation, referencing the unsuccessful attempts by the Nigerian National Petroleum Company Limited at direct distribution.
He recounted that state-run refineries began to decline when NNPC ventured into retail distribution.
"We urge President Tinubu to intervene by advising Dangote to slow down and adhere to established protocols. No one opposes the refinery; if anyone has supported it, it's our association. When this issue arose, we decided to offer counsel on how to approach it.
What matters to us is that the refinery is operational and producing quality products for Nigerians. Some may think our concerns stem from competition, but we are merely trying to prevent a repeat of the NNPCL failures.
In the past, NNPC successfully refined and distributed products through its subsidiary, but that changed when advice led them to handle distribution directly, resulting in the decline of our refinery,"
Korie stated, cautioning that Dangote's $20 billion refinery could face a similar outcome if it follows a parallel path.
Korie emphasized that while the association fully supports the Dangote refinery's operations, bypassing traditional distributors risks significant disruption to existing supply chains and could recreate the challenges faced by NNPCL previously.
He reiterated the importance of focusing on refining instead of mixing it with distribution operations.
He expressed NOGASA's willingness to collaborate with the refinery to ensure business sustainability, mentioning that while they support the refinery's completion, concerns about monopolization are prevalent among members.
"During our last meeting, our backing for the refinery's completion was clear, yet many of our members fear the overwhelming dominance. Dangote's plan to control distribution with the acquisition of 4,000 trucks induces worries about the livelihoods of those relying on existing supply chains.
Many Nigerians working within over 50,000 filling stations and logistics networks risk displacement if independent marketers are sidelined."
Korie called for government intervention to facilitate dialogue between Dangote Group and key industry stakeholders, including major and independent petroleum marketers.
Similarly, Billy Gillis-Harry cautioned against prematurely celebrating the Dangote refinery's nationwide distribution plans, predicting repercussions as companies seek to dominate multiple operational roles in the supply chain.
Reflecting on similar past issues within the cement industry, he expressed concerns regarding Dangote's market dominance and pointed out the financial losses filling station operators are incurring due to rapid price fluctuations.
With the Dangote refinery’s production capacity having been upgraded to 700,000 barrels per day, Gillis-Harry insisted that the entity should focus on refining and compete at a global level rather than operating in downstream distribution.
He stated, "Just yesterday, some began selling products at N817 per litre, resulting in a loss of over N80 per litre for filling station operators. Given the volume of products, it becomes evident that salaries could soon be jeopardized.
We, therefore, urge the Nigerian Midstream and Downstream Petroleum Regulatory Authority and the Minister of State for Petroleum Resources to promptly enforce pricing regulations, bolster market oversight, and safeguard local job security."
In response, a senior Dangote Group official expressed disbelief that any organization would threaten to disrupt fuel supply simply because an individual aims to provide free fuel distribution to Nigerians.
They questioned the motivation behind the attempt to disrupt a plan that eliminates logistics costs, implying that such resistance is unpatriotic.
"Why would they want to disrupt? Someone wants to distribute fuel for free (without the logistics expense).
We are not requesting compensation; we are merely highlighting that logistics contribute to high PMS costs, which we aim to reduce. So, why the anger? Why the disruption, unless it's anti-Nigeria? They seem to oppose Nigeria's progress,” the official remarked.
The IPMAN National Vice Chairman, Hammed Fashola, acknowledged that while he cannot assess NOGASA's capacity to disrupt fuel supply, he recognizes the common desire among all players in the oil sector to sustain their businesses in light of Dangote's potentially exclusionary plan.
In the meantime, depot prices for petrol surged by as much as seven percent, escalating from N815 per litre on Wednesday to N870 per litre on Thursday, coinciding with the Dangote refinery's sudden halt on petrol sales across its terminals. An internal memo announced that all payments for PMS loading should be immediately suspended, indicating a freeze on further allocations.
Reports surfaced that importers reduced petrol prices below those offered by the Dangote refinery, inciting renewed market competition.
However, recent findings indicated that depot owners have raised prices significantly, raising concerns for a possible nationwide increase in pump prices next week.
