In a strategic shift shaking up Nigeria’s downstream oil sector, several oil marketers have begun stripping their filling stations of the Nigerian National Petroleum Company Limited (NNPCL) logo, signaling an exodus from franchise agreements with the national oil firm.
This move follows intense competition fueled by the pricing strategy of the $20 billion Lekki-based Dangote Petroleum Refinery.
Industry sources reveal that more independent marketers, particularly in Lagos, are considering a similar shift as the recent crash in refined product prices by the Dangote refinery reshapes the sector’s dynamics.
Already, stations previously branded under the NNPCL franchise, particularly in locations such as Wawa and Ibafo along the Lagos-Ibadan expressway, have rebranded under new private ownership.
The major driver of this trend is the fierce competition among marketers to secure refined petroleum products at the lowest possible cost.
Since the deregulation of the downstream oil sector, independent marketers have been seeking alternatives to optimize product off-take at cheaper rates.
Reports indicate that the recent price reduction by Dangote Petroleum Refinery has significantly undercut the landing costs of imported petrol.
The refinery recently slashed its loading costs from N950 to N890 per litre, igniting a price war that has put pressure on dealers affiliated with NNPCL.
Marketers argue that rebranding their filling stations is a strategic move to access cheaper products from alternative sources, primarily the Dangote refinery.
This assertion was confirmed by the National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Ukadike, who acknowledged that franchise deals with NNPCL are becoming less attractive due to evolving market conditions.
A franchise license in the oil sector allows businesses to distribute products under an established brand name.
Historically, NNPCL’s dominance in fuel importation made its franchise agreements lucrative. However, the emergence of Dangote Petroleum Refinery has disrupted this arrangement, giving independent marketers a new source of supply at competitive rates.
Ukadike explained that some marketers are changing and rebranding because NNPCL is no longer the exclusive importer and distributor of petrol. Previously, marketers gave their stations to NNPCL under franchise agreements to secure product availability.
Now, with multiple sources of supply, marketers are switching brands to maximize returns. He further noted that filling stations formerly affiliated with NNPCL are now being rebranded under companies like MRS, which offer more competitive prices.
Efforts to obtain comments from NNPCL’s spokesperson, Femi Soneye, proved futile as messages sent to his phone remained unanswered.
However, industry analysts suggest that the inability of NNPCL to fix fuel prices in collaboration with the Dangote refinery has further complicated its position in the market.
Oil and gas expert, Olatide Jeremiah, confirmed that many marketers initially pursued NNPCL franchise licenses to gain access to cheaper fuel.
However, with Dangote’s competitive pricing, the reliance on NNPCL has diminished. Marketers paid millions for franchise licenses to load fuel from NNPCL depots at a lower cost. But with Dangote now selling to everyone at competitive prices, the need for such franchises is fading.
The Chairman of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) in Lagos, Akinola Ogunyolemi, revealed that most of the outlets removing NNPCL branding were never owned by the company.
Instead, independent marketers had entered into agreements with NNPCL to use its brand name. These stations belong to individual marketers.
If their contracts with NNPCL expire or they get better deals, they simply rebrand under another company. It’s a business decision.
Analysts predict that more filling stations will abandon their NNPCL franchise as imported petrol continues to cost more than locally refined products.
The latest data from the Major Energies Marketers Association indicates that the landing cost of imported Premium Motor Spirit (PMS) has surged to N910.52 per litre, making it less competitive than Dangote refinery’s offering.
The Dangote refinery has justified its price reduction as a response to global energy market conditions and fluctuations in international crude oil prices.
In a recent statement, Group Chief Branding and Communications Officer, Anthony Chiejina, explained that the price revision reflects the ongoing fluctuations in global crude oil markets.
Our strategic adjustment is aimed at ensuring affordability for Nigerians while maintaining global market competitiveness.
With more marketers likely to abandon NNPCL’s franchise system in favor of independent sourcing, the future of Nigeria’s fuel distribution landscape is set for a significant transformation.
As competition intensifies, industry players will continue seeking avenues to secure the most cost-effective and profitable supply chains, signaling a new era in the downstream oil sector.