Nigeria’s Dangote blames weak regulatory oversight for ‘dumped’ fuel undercutting supply

Nigeria’s Dangote refinery has blamed poor enforcement of the country's new fuel quality standards for shrinking demand for its gasoline, with international traders among thosecapitalizing on weak oversight, according to a refinery executive and a company statement.

The 650,000 b/d refinery had planned to market its gasoline locally to bolster Nigeria’s energy independence and break a history of import reliance on Europe. Yet it has run into issues distributing its supply since beginning gasoline production in September, forcing it to resort to holding 500 million liters in storage, CEO Aliko Dangote told stakeholders at a meeting in Abuja Oct. 29.

Nigeria’s fuel regulator NMDPRA has linked falling demand to a five-fold increase in gasoline prices at the pump over the last year, while Dangote says continued imports have undercut its fuel.

In statement via X Nov. 3, Dangote denied that legitimate gasoline imports were available at cheaper prices than its own production. “If anyone claims they can land PMS [premium motor spirit] at a price cheaper than what we are selling, then they are importing substandard products,” it said.

In October, Nigeria’s fuel regulator NMDPRA significantly improved its gasoline fuel quality standard, from 150 parts per million (ppm) of sulfur content to 50 ppm. It has gradually been reducing its sulfur cap from levels that were once over 1,000 ppm as part of a drive by the Economic Community of West African Countries (ECOWAS) to raise standards and reduce health risks.

However a lack of testing facilities and its own laboratories to audit fuel quality has prevented NMDPRA from enforcing the new rule, Dangote says.

The NMDPRA was not immediately available for comment.

Multiple trade sources have said that Dangote is marketing gasoline supply that complies with the 50 ppm limit, while the refinery source said sulfur content from the plant was as low as 10 ppm.

European suppliers have also unilaterally acted to improve the quality of their supply, with all three ports in the dominant Amsterdam-Rotterdam-Antwerp fuel hub now enforcing a 50 ppm sulfur cap on fuel exports to combat the practice of dumping harmful fuels in West Africa. However, new trade routes have emerged, according to Dangote officials.

Speaking to Commodity Insights Nov. 3, an executive from the refinery said blending hubs have cropped up in Malta and offshore Lome to facilitate production of discounted supply. One international trader had also recently hired a depot near the refinery to blend its supplies with lower quality fuel, according to the statement from the refinery.

Dangote also hinted that Nigeria should consider a more protectionist trade policy to support its expanded refining sector after the inauguration of its $20 billion refinery this January.

“It is not unusual for countries to protect their domestic industries in order to provide jobs and grow the economy,” it said citing import tariffs on goods such as electric vehicles in the US and Europe.

NNPC commercials

Separately, a lack of price transparency for its crude supply has put pressure on Dangote operations, according to the refinery source.

Starting October, Dangote and NNPC, Nigeria’s state oil company and a 7.2% stakeholder in the project, had agreed to transact in Naira for crude and product purchases, ostensibly removing exchange rate exposure.

Yet, according to the Dangote executive, the refinery is yet to agree on a proper price framework with NNPC, which had committed to supply 385,000 b/d of crude in Naira.

Under the arrangement, crude should be priced in dollars before being converted to Naira and paid by the refinery, based on an agreed exchange rate, he said. Yet with the parties yet to agree on an exchange rate and fix a pricing formula, the six crude cargoes NNPC has supplied to the refinery in October have still not been invoiced, according to the refinery source.

“Without knowing my purchasing price, how can I fix my selling price?,” the refinery source said.

In its statement, Dangote said it was offering gasoline at Naira 990/liter for sale into trucks, a level it says was benchmarked against international prices and is at parity with the price NNPC had offered to domestic marketers.

NNPC was not immediately available for comment.