Dangote Refinery Faces Boycott from Local Marketers, Exporting Majority of Production

The Dangote Refinery, Africa’s largest, is facing challenges as local petroleum marketers in Nigeria continue to boycott its products, preferring to import refined petroleum from abroad. Devakumar V.G. Edwin, Vice President of Dangote Industries Limited, expressed frustration over the boycott during a discussion hosted by Nairametrics on X (formerly Twitter) on Wednesday. Despite the refinery’s efforts to supply affordable petroleum products, most Nigerian traders have refused to purchase from the facility.

Edwin explained that the Dangote Refinery was established with the goal of reducing Nigeria’s reliance on imported petroleum products by utilizing locally sourced crude oil. “The whole purpose of doing this refinery in Nigeria was to utilize our local crude instead of exporting raw materials and importing finished products,” he said. “We should be able to refine and use the finished products within Nigeria and produce more to export the surplus.”

However, this vision is being challenged. Despite the refinery’s capacity to produce 54 million liters of refined petroleum products per day, only 3% of its output is currently sold locally. Local marketers have been reluctant to buy from the refinery, forcing it to export 97% of its production, including diesel and jet fuel, to international markets.

Boycott and Alleged Market Manipulation

Edwin suggested that local marketers are deliberately blocking the refinery’s operations by refusing to buy its products, accusing them of preferring to continue importing refined products from abroad. He further revealed that some marketers had written to President Bola Tinubu, who also serves as Nigeria’s Petroleum Minister, complaining about the refinery’s pricing strategy. “They wrote to His Excellency, the president, claiming that we are disturbing the market by dropping our prices,” Edwin disclosed.

In response to market dynamics, the refinery reduced its prices twice to encourage local sales, but this led to further resistance from the marketers, who accused the refinery of undercutting the market. “I’m selling 2 to 3% to small traders who are willing to buy, while the rest 95 to 97% I’m forced to export,” Edwin lamented.

Edwin also highlighted the inconsistent supply of local crude oil, which has forced the refinery to rely on imported crude from countries like the United States and Brazil. International oil companies (IOCs) often prioritize foreign markets, selling crude oil at prices significantly above the market rate for local buyers. This has exacerbated the challenges faced by the Dangote Refinery, which has sufficient production capacity to meet Nigeria’s entire petroleum needs. According to Edwin, 44% of the refinery’s output is enough to cover 100% of the country’s demand for refined products.

Despite the ongoing challenges, President Bola Tinubu has remained silent on the matter. Aliko Dangote, Africa’s richest individual and owner of the Dangote Refinery, has alleged that corrupt government officials and top executives at the NNPC own blending refineries in Malta and would prefer Nigeria to continue importing refined petroleum products rather than support the success of the Dangote Refinery.

Impact on Local Petroleum Market

The boycott by local marketers has prompted the Dangote Refinery to consider exporting its Premium Motor Spirit (PMS), commonly known as petrol, if the Nigerian National Petroleum Company (NNPC) Limited and other domestic petroleum marketers continue to refuse to purchase it. The situation is alarming given that Nigeria’s petrol import bill reached a record high of N3.22 trillion in the second quarter of 2024, accounting for 25% of the country’s total imports during this period, according to the National Bureau of Statistics (NBS).

In contrast, the commencement of operations at the Dangote Refinery has already led to a 60% decrease in diesel prices in the local market. Prior to the refinery’s operations, diesel was sold at around N1,700 per liter, but the refinery has managed to reduce the price to about N1,000, even as the exchange rate rose to approximately N1,500 per dollar.

The refinery’s struggle reflects broader challenges in Nigeria’s energy sector, where policy decisions, market dynamics, and allegations of corruption continue to shape the future of local production and self-sufficiency. As the situation unfolds, the Dangote Refinery’s potential to transform Nigeria’s petroleum landscape remains uncertain amid resistance from local marketers and lack of government intervention.