Nigeria Ends NNPC’s Monopoly as Dangote Refinery Begins Direct Fuel Sales to Local Traders

Nigeria’s local fuel traders can now purchase petrol directly from the Dangote Oil Refinery, ending the state-owned NNPC’s exclusive purchasing rights, as the government takes significant steps towards fully deregulating the petroleum processing sector. Finance Minister Wale Edun announced the shift on Friday, marking a new chapter in the country’s energy market.

The Dangote Oil Refinery, Africa’s largest, began processing petrol in September with an initial agreement that made NNPC Ltd the sole buyer, allowing the government to maintain fuel subsidies. However, in a significant policy shift, NNPC raised fuel prices by over 15% this week, effectively selling petrol at market rates for the first time in more than three decades. This marks Nigeria’s exit from the costly subsidy program, which had long burdened the country’s finances.

A Move Toward Deregulation and Competition

“This direct purchasing mechanism allows marketers to negotiate commercial terms directly with the refineries, fostering a more competitive market environment and enabling a smoother supply chain for petroleum products,” said Finance Minister Edun. By enabling traders to deal directly with the Dangote refinery and other local refineries, the government hopes to create a more competitive and efficient market.

The Dangote Oil Refinery, with a daily capacity of 650,000 barrels, is poised to reduce Nigeria’s heavy reliance on imported oil products, a long-standing issue for the oil-producing nation. The refinery’s output is expected to meet Nigeria’s fuel demands while also improving energy security.

Crude Sales in Local Currency

Further solidifying the move towards deregulation, a Nigerian government committee, chaired by Edun, approved the sale of crude oil to the Dangote refinery in naira. This shift will allow the refinery to fully cater to the domestic fuel needs, supporting the government’s aim of transitioning to a completely deregulated petroleum market.

This directive also applies to all local refineries operating in Nigeria, marking a significant overhaul of the country’s oil processing and distribution system. As the country adjusts to a market-driven fuel pricing regime, the long-term implications for Nigeria’s economy, fuel prices, and consumers will be closely watched. This transition reflects broader efforts to improve efficiency and competitiveness in Nigeria’s energy sector, while reducing the strain on government finances caused by subsidies.