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Pricing: Fuel depot, tank farm owners face major financial ruin 

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Pricing: Fuel depot, tank farm owners face major financial ruin 

…as marketers get direct supply from Dangote Refinery

Depot and tank farm owners operating in Nigeria’s midstream petroleum sector are facing an existential threat from the direct supply of refined petroleum products arrangement between fuel marketers and the management of Dangote Refinery Petrochemical Plant in Lekki, Lagos State, Business Hallmark can report.

According to BH findings, private fuel depots and tank farms, especially those located in the port city of Lagos, started experiencing low sales from April 2024, when Dangote Refinery commenced the sale of diesel to marketers from its 650,000 barrel per day facility in Lagos. The situation worsened in September 2024, when the refinery started supplying petrol to the market.

It would be recalled that the $20billion worth refinery, which began operations in January 2024, commenced the sale of Automotive Gas Oil (AGO), popularly known as diesel, to oil marketers in February 2024. The management of the refinery, however, fixed the minimum quantity a marketer can purchase at one million litres.

However, independent marketers, who are unable to raise the required funds needed to purchase the minimum one million litres, our correspondent learnt, have been teaming up to raise funds to purchase the product, which they then share based on their  contributions.

The entrance of Dangote diesel into the market subsequently crashed the price of the product, which was selling for between N1,700 to N1,800, to N1,150 and N1,300.

In the same vein, Dangote started pumping Petroleum Motor Spirit (PMS) produced from the refinery into the Nigerian market in September 2024.

Game changer

While it initially supplied the products exclusively to NNPC Retail, the refined petroleum products trading arm of the national oil company, supply was later extended to willing marketers with the financial ability to purchase the  minimum of 2 millions litres at a go.

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However, some major marketers in the nation’s downstream petroleum sector with massive interests in the  downstream petroleum sector, ably supported by the industry’s regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), insisted that importation of petroleum products from abroad will continue and that they’ll not be buying from Dangote to forestall monopoly.

The marketers decision not to buy from Dangote created  storm in the industry, with Alhaji Aliko Dangote, President of Dangote Industries Limited (DIL), owners of the refinery alleging that a ruthless oil cabal with blending plants abroad is hell-bent on sabotaging his business by bringing in adulterated fuel from their plants sited in countries like Malta, Angola and Ivory Coast.

The aggrieved marketers and NUPRC management fired back that Dangote that, apart from planning to perpetuate a monopoly, lacked the capacity to supply the volume of fuel  needed to wet the country,

While the brickbats lasted, two government refineries undergoing refurbishment, the old Port Harcourt and Warri Refineries, commenced fuel production, albeit at a much lower level.

The coming on board of the two refineries on the heels of Dangote Refinery’s entry, industry experts told BH, drastically reduced the need for bulk buying and storing of imported products for 90 days and above to ensure energy security.

“As you know, NNPCL used to import petroleum products in large quantities to guard against fuel shortage as Nigeria lacked local refining capacity. The generally acceptable buffer for energy security is 90 days (3 months) to 180 days (6 months) products storage.

“This is so because it takes about two months to bid, pay and transport petroleum products through the sea to countries where it will be consumed.

“Since any slight break in the flow chain could lead to supply disruption, most countries often hedge against the unforseen by storing products that can last several days, even months at a go in storage tanks.

“But with the resumption of local production, there is no more need to store products for a long period. I think we can provide for maybe a week or two weeks maximum. Anything above that is a waste of resources.

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“That is part of the waste  Nigerians pay for because of the inadequacies in the supply chain. Consumers pay between N40 to N100 storage fee on every litre of petrol.

“However, since marketers can get fuel daily from functioning refineries, there is no longer need for massive storage tanks, which come at a huge cost to construct and maintained.

“Dangote Refinery can have limited storage tanks to hold  products for a few days or weeks. But the longer the products spend in storage, the more consumers will pay in storage fees.

“That’s why Dangote cried out last year that he had over 500 million litres of petrol lying idle in his tanks. It is a lose-lose for everyone in the value chain”, the source stated.

He, however, regretted that the nation is replacing one waste for another with the ongoing construction of over six million barrels capacity tanks by Dangote Refinery to hold crude oil imported from abroad.

“I don’t blame Dangote. He  has to secure crude for his 650,000 bpd because NNPC has failed to do the needful. Unfortunately, it is Nigerian consumers that will pay for the added cost at the end of the day”, he stated.

A Paris-based magazine that focuses on African politics and economics, Africa Report, had on January 10, 2025, reported that Dangote Refinery was building eight more tanks in order to have enough storage for imported crude.

According to the media organisation, the refinery is ramping up its storage capacity by 6.29 million barrels, equivalent to one billion litres as local supplies become unreliable.

The refinery currently has 20 crude storage tanks with a capacity of 120 million litres each, totalling 2.4 billion litres. The new tanks will see crude storage capacity at the refinery jump by 41.67 per cent to 3.4 billion litres.

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Speaking to Africa Report, Vice President, Oil and Gas, Dangote Industries, Devakumar Edwin, claimed low crude supply from NNPCL was driving import dependence.

“Importing crude from other countries instead of buying locally means that our crude stockpiles will have to be higher.

“So we have started building eight additional crude tanks to hold a billion litres, over and above our original storage capacity. Four of them are nearing completion”, Edwin stated.

Meanwhile, the recent increment in the ex-depot price of petrol by Dangote Refinery and NNPCL, and its attendant consequences has forced many fuel marketers to boycott products put up for sale by depots and tank farm owners.

Marketeers’ game

The refinery had on Friday, January 17, 2025, jerked up the prices of petrol at its loading gantry, blaming it on rising prices of crude oil in the international market.

According to the refinery, the new prices will apply to buyers purchasing between 2 million and 4.99 million litres of petrol, who will now pay N955 per litre instead of the previous N899.50 per litre and those buying five million litres and above who will pay N950 per litre.

Hardly had the price announcement by Dangote Refinery dissipate that depot owners effected an increase in their prices.

For instance, Matrix, Sahara, Shellplux, Wosbab, Swift and NIPCO depots have all increased their prices. While Sahara Depot increased its loading price to N950 per litre from N910, Shellplux increased its price to N960 per litre from N908, Swift Depot  increased its price to N950 per litre from N907, Wosbab Depot increased its price to N950 per litre from N909.

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Expectedly, fuel marketers, who normally source their products from private depots, consisting largely of independent marketers, increased the pump price of their petrol, with some selling for as high as N980 and N1,050 in Lagos and its environs.

Meanwhile, filling stations owned by major marketers with robust supply from Dangote Refinery, such as MRS, Ardova, Heyden are selling the product from N945 and N970 in Lagos and its environs.

Other major marketers like Mobil, Total and Enyo also sell fuel to Nigerians at different rates of between N950 and N970 which attracted many buyers to their stations.

Unable to compete with major marketers, the parent body of  independent petroleum marketers operating in the country, the Independent Petroleum Marketers Association of Nigeria (IPMAN), advised its members to start sourcing their products from Dangote Refinery.

For members unable to afford the funds needed to buy directly from Dangote, the body directed them to form cooperatives to raise the required amount for the products, which they can then share proportional.

IPMAN’s Public Relations Officer, Chinedu Ukadike, who spoke on behalf of the association, explained that it will enable them to bypass the expensive fuel sold by depot owners.

According to Ukadike, relying on depot owners for products is no longer viable, especially when direct purchases from Dangote Refinery is possible.

“The minimum quantity to buy from Dangote Refinery is two million liters which comes down to N909 per liter. We can also buy from MRS, which also distributes Dangote’s petrol”, he admonished.

The management of Dangote Petroleum Refinery, BH learnt, signed an agreement with the leadership of IPMAN in November 2024 to supply its members 60 million liters of petrol every week, which amounts to 240 million liters monthly.

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Though, BH could not independently confirm the exact quantity of petrol independent marketers have taken from Dangote Refinery, sources in the know put daily supply from the refinery figure at between 150 million to 200 million litres.

This indicate that embattled fuel depots and tank farm owners have lost about 70 to 80 percent of their IPMAN market to Dangote Refinery.

A reliable source in one of the tank farms located in Ijegun, a suburb of Lagos, who did not want his identity disclosed because he did not have the authorization to speak, said millions of tonnes of petroleum products are currently sitting idle in private depots in Lagos with no buyer in sight.

The few products the depots are able to sell, the source claimed, are the ones purchased by filling stations owned by owners of the depots, as well as independent marketers without the financial muscle to buy in bulk from Dangote Refinery.

“You are well aware that most depots and farm tank owners are also stakeholders in the downstream petroleum sector, who own their own filling stations.

“However, they still need the patronage of independent marketers to break even as their own outlets account for less than 10 percent of their market”, the source lamented.

The owners of these tank farms, financial experts argue, will be faced with tough decisions by half year 2025 — either pack up and sell the fuel storage tanks as scraps or continue in business and fall into financial ruin.

Depot and tank farm owners under the aegis of Jetty and Tank Farm Owners Association of Nigeria (JEPTON) and Depot and Petroleum Products Marketers Association (DAPMA) had last year expressed concerns about the negative impacts of allowing Dangote Refinery to sell fuel directly to marketers at its 2,900 tankers capacity loading gantry.

Tank farm owners woes

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Speaking to BH on their fears, the tank farm owners argued that if allowed to stand, Dangote’s plan to sell fuel directly to retailers will deepen their economic woes.

According to the tank farm owners, allowing Dangote Refinery to allow trucks load products at its facility is tantamount to giving the firm a backdoor licence to do retail fuel marketing.

“Though it was not stated anywhere that Dangote will participate in retail fuel sales, the implication of allowing 2,900 trucks to load daily at its loading bay confirmed the unannounced approval that must have been given to it (Dangote) to be a farm tank operator.

“It is a well known secret that tank farm owners don’t own trucks. We only import fuel in large quantities or get supplies from the Nigerian National Petroleum Company Limited (NNPCL), which we then sell to filing stations.

“Some of our members have multiple storage tanks than can accommodate 4 million litres. This means that just one tank can supply 121 (one hundred and twenty one) 33,000-litre trucks.

“We have invested billions of dollars in building jetties, pipelines and storage tanks to hold petroleum products over time.

“Without doubt, Dangote venturing into fuel retail business will crowd us out, leading to huge debts and loss of investments”, a tank farm owner in Ijegun, who did not want his identity disclosed had told BH last year.

A JEPTON member, who also spoke on the matter, while imploring the Federal Government and regulatory authorities to stop Dangote Refinery from selling directly to retailers, said the refinery’s entry into the fuel retail arena poses questions about market fairness.

“Though I didn’t see anywhere where it was explicitly stated that Dangote Refinery had been granted approval to sell products to small buyers (retailers), we know the implication of allowing it load up to 2,900 trucks daily from its facility. That is 95.7 million litres daily.

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“We are only allowed a margin of about between N10 on a litre, which comes down to N330,000 on a 33,000 litre truck.

“With an extra gain of N330,000 on a truck, why will any petrol station owner come to me if he can get the product at a much cheaper rate from Dangote? Except the refinery will not be selling to small buyers at the same amount it will be selling to us”, the troubled farm owner asked rhetorically.

However, IPMAN’s Deputy Zonal Secretary, South West Zone, Idris Tajudeen, who also spoke to our correspondent, faulted tank farm owners’ claim of only adding N10 margin on each litre they get from NNPCL.

According to Tajudeen, tank farm tank owners add a margin of between N30 to N100 on every litre of petrol sold to marketers depending on the location.

“That is why you see filling stations owned by independent marketers sell fuel above N1,000 in Lagos and environs, and N1,200 and more beyond Lagos as they also add their own margins in order to make profit”, he said.

Billionaire businessman, Femi Otedola, had during the ceremony to introduce Dangote petrol to the public in September 2024, advised depot owners to sell their depots for scrap before the market shifts.

“I am reminded of the time you (Aliko Dangote) revolutionized the cement industry in Nigeria. Ships that once brought in cement turned into rusting relics, scraps of a bygone era. Now, with your refinery in full swing, I foresee a similar fate for fuel imports.

“Depot owners should take heed—it’s time to dismantle those depots and sell them as scraps while the market is still high. The world has changed, and those, who do not adapt will be left behind,” Otedola had warned.

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