*** Marketers applaud initiative as refinery absorbs logistics costs to lower distribution expenses and ease consumer burden
Dangote Petroleum Refinery and Petrochemicals has expanded its free petroleum product delivery initiative to Kano, Imo and Nasarawa States, a move expected to reduce distribution costs for independent petroleum marketers and create room for lower petrol prices at the pump.
The initiative, which began with deliveries to Lagos, Ogun, Rivers, Kaduna, Abuja and Delta States, is designed to bring petroleum products closer to marketers and retailers while removing the cost of transporting products over long distances from the refinery to various parts of the country. By absorbing the delivery cost, the refinery is reducing one of the key expenses built into the downstream distribution chain.
Group Executive Director Commercial Operations, Oil and Gas, WAEP and Fertilizer, Fatima Aliko Dangote, said the initiative was designed to ensure that the benefits of domestic refining translate into tangible savings for businesses and consumers.
“The value of domestic refining must ultimately be felt beyond the refinery gale. By absorbing the cost of delivering petroleum products to our costumers, we are removing a significant component of distribution burden and creating room for those savings to flow through the value chain to consumers.
Our is to make fuel distribution more efficient, reduce avoidable costs and support more competitive pump prices across Nigeria.
The expansion has been welcomed by the Independent Petroleum Marketers Association of Nigeria ( IPMAN), reduce some of the financial and logistical pressure confronting independent marketers and contribute to lower prices for consumers.
National Publicity Secretary and Public Relations Officer of IPMAN, Chinedu Ukadike, said the initiative addresses a long standing challenge in petroleum products distribution chain, where marketers commit substantial funds to product purchases and may then have to wait for extended periods before that orders are loaded and transported.
“This gesture, if sustained will be able to alleviate the sufferings of independent marketers,” Ukadike said. “These has been the issue of financial hold up, whereby marketers pay for products and are not loaded for days and weeks, and they suffer unnecessary hardship bringing the product down.
According to him, the refinery’s delivery arrangement reduces the period for which marketers fund remain tied up, improves cash flow and allows businesses to deploy their capital more efficiently.
“This time around, Dangote has made it very, very easy for marketers. Marketers are jubilating, and you will see the return on investment as an independent marketer. Your money will not be tied down,” he said.
Ukadike said the initiative could also have direct impact on pump prices because transportation represents a cost that ultimately forms part of the price paid by consumers. You also have less risk, and you have petroleum products at your doorstep. Other consumers will also see that our pump price will not continue to go up.
The more Dangote brings down its price pump price, the independent marketers will bring down theirs, he said.
The reduction in distribution costs is particularly significant for marketers serving locations far from the refinery. Under conventional distribution arrangements, petroleum products transported over long distances incur additional costs associated with haulage, vehicle operations, drivers expenses, insurance, road risks and other logistics. Removing or reducing these can improve the economic of supply those markets and create greater scope for competitive retail pricing.
The initiative also reduces the operational risks associated with moving large volumes of petroleum products over long distances. By taking products closer to their destination markets, the refinery is helping to shorten the supply chain and improve their distribution and efficiency of product distribution.
Ukadike commended the management of Dangote Refinery for the initiative and urged the company to extend the programme to more locations across the northern states, to promote wider access to competitively priced petroleum products.
“This is the beauty of deregulation and competition, he said. The expansion comes as Nigeria downstream petroleum sector continues to adjust to the growth of domestic refining capacity and more competitive market environment. The Dangote Petroleum Refinery with capacity of 700,000 barrels per day, is increasingly supplying refine petroleum products to the domestic market while also its presence in international markets.
The free delivery initiative adds another dimension to the refinery’s impact on the downstream sector. Beyond increasing domestic supply, the refinery is now taking steps to reduce the cost of moving this products from the refinery to the consumers.
For motorists and households the potential benefit is straight forward, the lower the cost of moving petrol through the supply chain, the greater the opportunity for marketers to reduce the price consumers pay at the pump.
