Depot owners and major fuel marketers: The unfair bashing of downstream sector critical stakeholders

As the nation grapples with gasoline (a.k.a petrol) supply and distribution hiccups and its attendant strain on economic activities, the expected role(s) of each of the stakeholders in the supply and distribution value chain has come to the fore for discourse and dissection once again.

This has become even more so given the recent announcement of commencement of petrol roll out by the Dangote Refinery and the public interventions and opinions around it.

One of those interventions was by the billionaire businessman and a close pal of Alhaji Aliko Dangote, the Chairman of Dangote Refinery, Mr Femi Otedola.

While congratulating his friend and business partner for this undoubtedly great feat and praising his courage for staying the course to the very end in spite of the intimidating challenges and booby traps on the path to achieving the ultimate goal,  Otedola took a swipe at the depot owners, urging them to dismantle their depots and dispose of them as scrap.

Said the billionaire businessman: “I am reminded of the time you revolutionized the cement industry in Nigeria. Ships that once brought in cement turned into rusting relics, scraps of a bygone era. Now, with your refinery in full swing, I foresee a similar fate for fuel imports. The depot owners should take heed—it’s time to dismantle those depots and sell them as scraps while the market is still high. The world has changed, and those who do not adapt will be left behind.”

The first industry player to respond to the billionaire’s salvo was Chairman of Integrated Oil and Gas Ltd., Capt. Emmanuel Iheanacho (rtd), a member of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN).  While noting that petroleum products storage depots were a vital component of the fuel supply chain, he submitted that they (depots) complement  primary fuel sources.

He said: “While there might be competitive elements in the market, collaboration and cooperation are essential for ensuring a stable fuel supply in Nigeria.

“Petroleum depots are not a replacement for primary fuel sources but are crucial for storing and distributing products to meet demand,” Iheanacho said.

He noted that while private depots may compete with the Nigerian National Petroleum Company (NNPC) Limited in terms of storage and distribution, they were not necessarily in direct competition with the NNPC or the Dangote Refinery.

“Instead, these depots often work in conjunction with both to support a reliable fuel supply chain. Depots are key partners in supporting the entire supply chain, including NNPC and Dangote,” he said.

Mr Otedola will not be the first key stakeholder to engage in what some industry players have come to describe as unfair bashing of  depot owners and major local fuel traders/marketers.

Only recently Crude oil Refineries-Owners Association of Nigeria, CORAN, castigated these critical stakeholders in the fuel supply and distribution value chain, describing them as mere middlemen whose activities put pressure on the nation’s foreign exchange.

Said Eche Idoko, the Publicity Secretary of CORAN: “I agree that they are investors too, but it is an opportunity cost.  What value do depot owners create? Depot owners will ask you for a foreign exchange. Because of their operation and because of their middlemanship, depot owners will push the price up by about N150. ”

Idoko was not done. He went further: “If we have to accommodate depot owners, it means we will continue to import, and the naira will be under perpetual pressure.”

But industry watchers and depot owners have Indeed continued to insist that the notion that  depot owners and marketers are mere middlemen with little contribution to the petroleum products supply and distribution value chain are illogical and implausible. They described such view as unfounded and ridiculous.

Said an Executive Director of a major oil marketing company who spoke anonymously:  ” The problem really is that in this country, we love to play to the gallery. Petroleum products supply and distribution value chain is a global business that is not peculiar to Nigeria. How will anyone suggest that because of the advent of locally produced products, depot owners and oil marketers have lost relevance? How will anyone ask depot owners to go and sell their depots as scraps?  The first simple question to ask is: can all motorists in Nigeria start driving their vehicles to the refineries to fill their tanks?”

“Globally, distribution of products refined by the refineries is a critical aspect of product supply and distribution value chain. The huge investments on depots, loading bays, trucks, filling stations etc will continue to be of compelling need in the sector. These investors are not just business men and women, but patriots who have made sacrifices , invested hard earned monies and took loans in billions of naira, sometimes with very high interest rates to ensure end users enjoy seamless supply of the products. How can such Nigerian investors then suddenly become an object of ridicule and scorn?”

What appeared like a campaign against depot owners and major fuel marketers was amplified late in June, 2024, when the management of Dangote Refinery accused the NNPCL of indiscriminately issuing licences to oil marketers that imported off spec products,  also referred  to as dirty fuel into the country.

DAPPMAN had to issue a strongly worded press release to debunk the claim and  berate the refinery’s management.

The Association stated: ” DAPPMAN wishes to state emphatically that no member of the association and indeed, no private fuels depot has imported into the country any fuel with specification that is outside of the regulation other than what is currently approved by the NMDPRA and would wish to state that the information from the Dangote Refinery management is laced with inaccuracies.”

Not so long after this was repudiated, another falsehood sprang up again. This time, the allegation was that depot owners and major fuel marketers were not excited  about the idea of local refineries commencing production of products and that they (depot owners and major marketers) have preference for imported products as against locally produced fuel. This fresh round of allegation also didn’t stand the test of time before it was put out.

Executive Secretary of DAPPMAN, Olufemi Adewole in a statement debunking the allegation on August 15 said: “It is absurd to suggest that depot owners are intentionally obstructing local refineries or trying to shortchange the country. Basic business sense dictates that any entrepreneur would prefer to work with a supplier who offers products at competitive rates with minimal challenges in accessing those products. We would much rather avoid the arduous process of sourcing foreign exchange for our trading activities, which puts pressure on the naira, and instead, source all our products from local refineries using local currency, as is being considered following President Bola Ahmed Tinubu’s directive.”

Adewole pointed out that DAPPMAN and its members were enthusiastic about the commencement of operations at the Dangote refinery saying the Association had initiated several meetings with the refinery’s management on smooth logistical operations. “As soon as the Dangote refinery began production, DAPPMAN leadership initiated several meetings with the refinery’s management to discuss supply options and arrangements, driven by our excitement about this development,” Adewole noted.

The allegations didn’t stop at the aforementioned. Depot owners were also accused of deliberately engaging Dangote Refinery in a war of attrition to sabotage the 20 billion dollar project.

However, a cursory look at some of these allegations will have one thinking if those spewing them understand how the downstream sector of the petroleum industry works. Or, perhaps,  it is a deliberate attempt to give a dog a bad name in order to hang  it.

Even if fuel was in excess supply from the refineries, it cannot just flow to the end users without an interface. The pillars of this interface being so dubiously denigratedand disparaged as ‘mere middlemen’ expend billions of Naira as investments on depots, loading bays, trucks to filling stations, without which end users cannot get fuel. How about the employment window it opens to thousands of Nigerians particularly in the area of fuel distribution and sale?

One needs not be told how important DAPPMAN and other fuel marketers are in the oil industry ecosystem. Even when they are owed billions of Naira by the authorities in bills incurred in bringing in fuel, they remain undaunted and continue to put in every effort to ensure that end users have access to petroleum products.

From time to time, industry watchers have, in a bid to address the reduction of the importance of depot owners and oil marketers to ‘mere middlemen’ explained that without them, other elements in the supply chain would struggle in vain to deliver fuel to consumers.

According to them, the role of depot owners and major marketers in Nigeria’s fuel supply chain is indispensable particularly in the context of the delivery of petrol by  the Dangote

Refinery as it will require the active participation of all the stakeholders in the downstream sector to ensure a seamless delivery of products to Nigerians.

It is important to state that product production locally for local consumption will be more or less a futile exercise without a corresponding strong, competitive and effective distribution channels that ensure seamless flow of finished products to end users, thus ensuring uninterrupted supply and distribution value chain.

Wilson-Pepple wrote in from Abuja.