Depot owners deny sabotage allegations against local refineries

Depot owners in Nigeria have once again dismissed accusations that they are undermining local refineries, instead preferring to continue importing petroleum products. They also reject claims that their operations inflate foreign exchange demand and contribute to rising fuel prices.

In a media briefing on Wednesday, Olufemi Adewole, Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), clarified that their members are patriotic investors who have heavily invested in infrastructure across the downstream value chain to ensure the seamless distribution of petroleum products nationwide.

“It is preposterous to infer that depot owners are out to frustrate local refineries and are in the business to shortchange the country. Even street business sense will show you that any businessman will readily patronise a  supplier that offers a product at the most competitive rate with the least stress of accessing such  product.

“We will rather do away with the tedious process of sourcing forex for our trading activities, thereby eliminating the pressure on the naira, and source all our products from local refineries in the local currency, as it is presently being considered in the light of President Bola Ahmed Tinubu’s directive”

“For instance, immediately the Dangote Refinery commenced production, DAPPMAN leadership and members, excited about the development, held series of meetings with the company to discuss supply options and arrangements with its management at our own instance.”

“These Depot Owners, who are unfairly labelled as anti local refineries, have commenced patronage of Dangote Refinery despite the operational challenges encountered”

On the submission by some players in the oil industry that depot owners add little value in the fuel distribution value chain, the Executive Secretary stated: “The final end-user of the fuel cannot buy directly from refineries hence depots play the role of off-takers of large volumes, in ships, chartered and paid for in foreign exchange, to the various fuel depots and distribute to both their own branded retail outlets and to other willing independent retailers. In addition, some of these depots operate and manage fleets of tanker trucks, for greater efficiency of their distribution processes so it is errorneous to assume depot owners add no value to the downstream distribution network”

“Anyone, who truly understands the workings of the downstream sector and is not on a mischief mission, cannot claim that depot owners are mere middlemen who are in the value chain just to push up prices of products. Depot owners will be more than happy to source all their products locally, in naira as long as the product is of the right specifications and the business terms are fair and competitive.”

Recall that  Crude Oil Refiners-Owners Association of Nigeria (CORAN), recently came hard on depot owners, accusing them of putting pressure on foreign exchange and pushing up prices of petroleum products.

According to Eche Idoko, the Publicity Secretary of CORAN, “depot owners will ask you for  foreign exchange. Because of their operation and because of the middlemanship, depot owners will push the price up by about N150.”

He added: “Right now, I can tell you that independent marketers are buying product at N800. If you remove these depot owners, it can’t be like that. An oil depot cannot be a viable plan for any country that wants to survive.”

Disputing the accusation that depot owners push prices up, DAPPMAN Executive Secretary noted: “What people who make such claim lose sight of is the fact that NNPCL, assigned the task of the country’s energy security as the importer of last resort, is presently the sole importer of PMS into the country”

NNPCL, according to industry operatives, only licences some marketers to bring in products on its behalf. The foreign exchange status during each exercise of bringing in the product, they noted, dictates the price the product is brought into the country. The marketers pay the differential between the pump price and the actual cost of importation. Industry sources noted the fact that NNPCL owes these marketers humongous amount arising from such differentials.

On the contention that the depot owners add little value to the sector, the Executive Secretary said: “The reality of the downstream sector operations is that whether you source your locally or via imports, these private depots remain a very vital part of the value chain. There is no refinery in the world that is wholly focused on direct delivery to the retailer; rather cargoes are freighted through vessels to fuel storage and distribution depots which thereafter distribute via tanker trucks to the various retail outlets. These depots and their distribution infrastructure and facilities get the products to end users. Refining is a crucial aspect of the downstream sector, just as distribution which includes depots for storage, transportation of products, the pump stations etc. Each adds huge value. None of them can be wished away.”