Marketers Ditch NNPCL as Price War with Dangote Heats Up – 20% Drop in Petrol Costs

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Posted: February 5, 2025 at 12:59 pm, Updated: February 5, 2025 at 12:59 pm

Marketers Ditch NNPCL as Price War with Dangote Heats Up – 20% Drop in Petrol Costs”

Some oil marketers are now removing the Nigerian National Petroleum Company Limited (NNPCL) logo from their filling stations. This shift comes as competition in the downstream oil sector intensifies, driven by a fierce price war with Dangote Petroleum Refinery.

Sources confirm that many marketers, especially in Lagos, are reconsidering their affiliation with NNPCL due to a significant drop in prices of refined products. This price change follows the aggressive pricing strategies by the $20 billion Dangote refinery based in Lekki.

Several dealers, once proudly displaying the NNPCL brand at locations such as Wawa on the Lagos-Ibadan expressway and Ibafo, have already taken down the logo. These stations have rebranded, moving away from their previous franchise deals with NNPCL.

Independent marketers are now seeking better deals, hoping to buy cheaper products. The deregulation of Nigeria’s downstream oil sector has fueled a more competitive market. As a result, many filling stations that once carried the NNPCL brand are now rebranding under private oil companies, particularly those in Lagos and its surrounding states.

There is also the possibility that more marketers will abandon their licenses with NNPCL, driven by the reduced costs of petrol refined at Dangote’s refinery. Dangote’s petrol price is now lower than the cost of imported petrol, making it a more attractive option for marketers.

The current petrol price war, sparked by Dangote Petroleum Refinery, became more heated recently after the refinery slashed its loading costs from N950 to N890 per liter. This reduction has added pressure on other marketers to follow suit.

A key strategy for these marketers is rebranding their stations to access cheaper petrol from Dangote and other sources. The National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike, confirmed this strategy in an exclusive interview.

The franchise license that oil marketers hold is essentially an official permission to operate under a brand, allowing them to distribute products through established systems. Ukadike explained that marketers are rebranding because NNPCL no longer exclusively imports and distributes petrol. This has given room for other players like Dangote to enter the market with competitive prices.

“Some marketers are changing their station names. It used to be that NNPCL was the only distributor of petrol, so marketers gave their stations to NNPCL in exchange for products. But now, with competition from Dangote and other brands like MRS, the game has changed,” Ukadike explained.

Marketers now want to ensure they’re offering cheaper petrol and making higher profits. Ukadike noted, “If you’re carrying a big brand like Total and they aren’t providing the petrol you need, it doesn’t make sense to keep the name. You need a reliable source of petrol at a better price to stay in business.”

NNPCL spokesperson Femi Soneye did not respond to inquiries about why marketers are dropping their franchise with the company.

Industry expert Olatide Jeremiah, CEO of petroleumprice.ng, further explained that the franchise model allowed marketers to secure cheaper products from NNPCL. However, the competition from Dangote’s refinery, which could sell products at even lower prices, disrupted this arrangement.

Jeremiah described how the shift occurred after the removal of the petrol subsidy. “After subsidy removal, petrol prices rose. NNPCL was asked to manage prices, but the landing cost of imports was higher than the government-regulated price, which led to losses,” he said.

Before the rise of Dangote’s refinery, marketers were able to secure cheaper products through their NNPCL licenses. However, Dangote’s ability to produce at lower prices changed the dynamics. Independent marketers noticed that they could now source cheaper products directly from Dangote.

“The NNPCL was dictating prices in the past, but once Dangote entered the market, things shifted. Marketers could now get better deals elsewhere,” Jeremiah added.

Akinola Ogunyolemi, Chairman of the Petroleum Marketers Association of Nigeria (PETROAN) in Lagos, noted that most filling stations are not actually owned by NNPCL. Rather, they are privately owned businesses that signed franchise deals with NNPCL. When these agreements end or the owners receive better offers, they often rebrand.

“The stations are not owned by NNPCL. If the contract ends, or if the station owner gets a better deal, they might change the brand,” Ogunyolemi said.

The shift in branding may signal the end of agreements between marketers and NNPCL, or possibly breaches of contract. Experts also suggest that more marketers might soon lose their licenses, as the price of imported petrol is now higher than the locally refined products from Dangote’s refinery.

Recent data from the Major Energies Marketers Association showed that the landing cost of Premium Motor Spirit (PMS) at major depots has surged to N910.14 per liter. This cost increase makes imported petrol less competitive compared to Dangote’s domestic product.

The price drop from Dangote’s refinery came as part of its strategic response to the current global energy market conditions. Brent crude, the global oil benchmark, had recently dropped in price, allowing Dangote to revise its prices.

In a statement from Dangote Petroleum Refinery, Group Chief Branding and Communications Officer Anthony Chiejina explained the price cut, saying, “This reduction is in response to positive developments in the global energy market and a recent drop in international crude oil prices.”

The price of Brent crude, which had been as high as $81 per barrel in January, dropped to $76.76 per barrel by February. This price shift has contributed to the pricing changes seen in Dangote’s products.

Marketers in the downstream sector have also pointed to a competitive price war between Dangote, NNPCL, and other marketers as a key factor in the decision to lower prices. Many filling stations are now opting for cheaper products from Dangote as they try to keep up with the price competition.

A marketer explained, “We noticed that Dangote and private depots were offering similar prices, unlike before when there was a price difference. So, we started sourcing cheaper products to stay competitive.”

The issue became more urgent after some bulk buyers complained about losing money due to the higher costs they were paying for imported products. This led to a meeting among Dangote executives to discuss the price adjustments.

Despite the challenges, Dangote’s refinery continues to operate successfully, proving its ability to adapt and stay profitable. Industry sources say that while prices may have been reduced, Dangote’s refinery is still in a strong financial position.

“This price reduction was inevitable due to concerns raised by buyers,” a source close to the refinery said. “This is just part of the effects of deregulation in the oil sector. We can expect more competition and pricing wars moving forward.”