Price War: Marketers Form Partnership to Reduce Losses as Dangote, NNPC Crash Fuel Cost
- Nigerian fuel marketers are forming strategic partnerships to reduce losses and maintain steady product distribution amid volatile petrol prices
- Independent marketers are pooling resources to buy smaller truckloads, allowing them to sell quickly and avoid losses from frequent price cuts
- Petrol marketers urged the government to ensure all state-owned refineries operated efficiently to prevent downstream petroleum sector monopolies
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Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
Nigerian fuel marketers are forming strategic partnerships in response to the increasing pressures of volatile petrol prices to reduce losses, protect the viability of their businesses, and ensure consistent product distribution throughout the nation.
Source: Getty Images
Over the past three to four months, Dangote Refinery and NNPC Retail Limited, two of the biggest companies in the petroleum downstream value chain, have been engaged in fierce competition to capture the largest portion of the fuel market by periodic price reductions at the gantry and at the pumps.
While Dangote Refinery has partnered with a number of large retailers, such as Ardova Petroleum, MRS, Heyden, Optima Energy, Techno Oil, and Hyde, to offer products at lower prices than those found at other retailers, NNPC Retail Limited has responded to Dangote's price reductions by lowering its own prices.
The majority of Dangote Refinery partners currently sell petrol at N875 per litre, while NNPC Retail Limited outlets offer it for N870 per litre. Customers now have a variety of retail stores to choose from at prices that meet their budgets, so the trend appears to be in their favour.
Nonetheless, the pricing war and frequent fluctuations in petrol prices continue to be significant deterrents for gasoline marketers, particularly independent marketers who have lost substantial amounts of money as a result of these adjustments.
Nigerian fuel marketers affected by retail prices
Speaking to Daily Sun, Chinedu Ukadike, Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), discussed the implications of the frequent changes in the retail pump price of petrol.
He stated that although the price fluctuations were a positive aspect of the liberalisation of the petroleum downstream sector, they also presented their own set of challenges.
A new cooperative channel has been established, he said, whereby three petroleum product marketers pool their resources to buy a truckload of roughly 45,000 litres, as opposed to the custom of one marketer buying the entire truck, in order to help marketers stay in business.
Source: Getty Images
According to him, the plan is intended to minimise losses because dispensing 15,000 litres takes fewer days than 45,000 litres.
“We are doing this to tame losses so that by the time Dangote or NNPC decide to change their petrol prices, our members will have finished selling the 15,000-litre volume purchased.
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“This is an era where you buy what you can quickly sell and make do with the small margin before returning to make fresh orders. If you decide to buy in larger quantities now, I can assure you that the marketer would run into massive losses, because before you finish selling that volume, the bigger players might have slashed prices.”
Ukadike urged the federal government to ensure that all four state-owned refineries are running at maximum efficiency in order to avoid a monopolistic market in the downstream petroleum industry.
Expert raises questions on fuel market competition
An energy economist, Dr Eyitemi Adegboye, said the entry of Dangote Refinery into Nigeria’s fuel market is reshaping pricing dynamics and raising fresh questions about competition and sustainability.
Speaking with Legit.ng, she said:
“With Dangote Refinery entering the market and depot owners responding with price reductions, Nigerians are left wondering - are these cuts a glimpse of true competition, or merely a short-term pricing strategy?”
According to her the refinery's influence is already visible in how prices are responding across the supply chain:
“Dangote Refinery’s emergence as a domestic refining powerhouse is already altering these dynamics, as evidenced by its recent price cut from N828 to N827 per litre and the subsequent adjustments by depot owners and independent marketers.”
Nigerian customs announces sale of N400/litre petrol
Legit.ng also reported that Nigeria Customs Service (NCS) Comptroller General Adewale Adeniyi has authorised the immediate auction of confiscated petrol at a discounted fuel price of N10,000 per 25-litre jerrycan.
The product was seized over the weekend by the agency’s task force, Operation Whirlwind, which was reported to have confiscated petrol valued at over N63 million in the Lagos-Ogun axis, as Daily Sun reported.
During a press briefing, the National Coordinator of Operation Whirlwind, Assistant Comptroller General Hussein Ejibunu, praised the fuel seizure as a major victory in the battle against economic sabotage.
Editorial assistant Ololade Olatimehin provided exclusive commentary from an energy economist for this report.
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Proofreading by Bruce Douglas, copy editor at Legit.ng.
Source: Legit.ng
