The Dangote Petroleum Refinery has reached an agreement to supply 60 million litres of Premium Motor Spirit (PMS) to the Independent Petroleum Marketers Association of Nigeria (IPMAN) on a weekly basis, which translates to 240 million litres per month.
This comes as the $20bn Lekki-based refinery seeks to raise billions of dollars to import crude oil and increase production to reach its full capacity of 650,000 barrels per day.
IPMAN National Publicity Secretary, Chinedu Ukadike, confirmed that the association is finalizing discussions with Dangote and expects to start lifting PMS from the refinery before the end of November. The agreement has already led to a drop in petrol prices by N10 to N15 due to increased competition in the downstream sector following deregulation.
In the past 42 days, the Nigerian National Petroleum Company Limited (NNPC) and other marketers have imported over two billion litres of PMS, 414,018.764 metric tonnes of diesel, and 13,500 metric tonnes of jet fuel, worth approximately N3tn or $1.8bn. Despite the launch of the naira-for-crude deal with Dangote and other local refineries, fuel imports continue to surge.
IPMAN has appealed to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to pay their outstanding N10bn Petroleum Equalisation Fund, which was promised during a meeting with the Department of State Services and downstream sector stakeholders. The fund was set up to reimburse marketers for losses suffered from selling petroleum products at uniform prices nationwide before deregulation.
Dangote is reportedly in talks with various financial institutions to raise funds for crude supplies, with an estimated cost of $2bn every 90 days to secure a minimum supply of 300,000 b/d. Investors have expressed concerns over the refinery’s ability to secure a steady supply of crude and exposure to the devalued naira. The Africa Finance Corporation, a pan-African development lender, is among the institutions involved in the fundraising talks.
The Nigerian government recently agreed to supply the refinery with crude oil in naira for six months, pending further review. However, stakeholders have questioned NNPC’s ability to supply the required crude due to forward contracts. Even with NNPC’s supply, Dangote would need an additional 185,000 b/d to meet its target of 550,000 b/d by January.