Dangote Refinery’s lawsuit betrays monopolistic intent

The lawsuit filed by Dangote Petroleum Refinery and Petrochemicals at the Federal High Court in Abuja, seeking the cancellation of import licenses granted to the Nigerian National Petroleum Company Limited and six other oil marketers signals an insidious attempt by the giant refiner to impose a monopoly on the country’s oil market.

In the same lawsuit, the refiner also demanded N100 billion in damages from the Nigerian Midstream and Downstream Petroleum Regulatory Authority for continuing to issue the import licenses for diesel and aviation fuel, arguing that this was contrary to the provisions of the Petroleum Industry Act. Dangote claimed this had undermined its $20 billion investment as there was no shortage of local fuel supplies to justify importation.

The company also alleged that NMDPRA had threatened to impose a 0.5 percent levy on Dangote’s wholesale transactions, contrary to laws restricting such levies on transactions within free zones.

Dangote officials have downplayed the action, claiming that events had overtaken it and that it would be withdrawn at the next hearing in January. However, filing the suit ab initio betrays a lack of respect and tolerance for free market principles that underpin the full deregulation of the oil and gas downstream.

For a company that has received accolades at home and abroad for defying the odds to build the world’s largest single-train refinery with a capacity to process 650,000 barrels of crude per day and widely expected to end Nigeria’s dependence on fuel imports and help reduce pump prices, this underhand tactic to eliminate competition is revolting and must be resisted. The Federal Government must prevent the entrenchment of a monopoly in the oil market.

Oil marketers insist that since the market has been deregulated, they are free to source products from anywhere. Since its inception, Dangote Refinery has been embroiled in controversy including a face-off with regulators over the quality of its products; accusations of exhibiting monopolistic tendencies, which it denied; difficulties in securing domestic crude supplies; and poor relations with local oil marketers which it accused of boycotting its products. Aliko Dangote, the promoter, at one point offered to sell the refinery to highlight his frustrations. It took the intervention of President Bola Tinubu to resolve these challenges. At the construction stage, Dangote Refinery was granted several concessions by the government including a $1 billion equity investment by the NNPCL to ensure the project was completed. It is sheer hypocrisy and greed for Dangote Refinery to have an inclination to dictate how the market should run.

Ongoing projects such as the 200,000bpd BUA refinery, the existence of the four NNPC refineries being overhauled and other smaller players suggest that Dangote’s commanding position in the oil midstream is bound to be challenged ultimately. Its sheer size dictates that it must seek markets beyond Nigeria for full uptake of its products. Dangote Refinery is already exporting jet fuel to Europe and has its eye on the rest of Africa. It has a global market in which to play.

Monopolies are antithetical to free market principles in that they stifle competition, consumer choices, and allow elevated price regimes. The United States and European authorities have engaged in anti-trust battles with big tech companies by imposing huge fines and breaking up entities for these reasons. Nigerians have just learned that local refinery operations do not necessarily mean cheaper fuels. It is distressing that the price of petrol is now over N1,000 per litre at filling stations despite the elimination of import costs such as freight, finance charges, port, lightering, and other costs. If Dangote’s fuel prices were fair, it should be well positioned to undercut any competitor importing fuel without resorting to legal manoeuvrings.

The NNPCL’s monopoly of fuel imports and lately petrol supply as sole off-taker from Dangote Refinery created distortions and disruptions in the market with consumers having to endure punishing fuel queues now and again for weeks on end amid soaring prices. It will be disastrous to replace a public sector monopoly with a private sector variant.

Rather than complaining and seeking to strong-arm the competition, Dangote Group must eliminate any inefficiencies in its system. It must offer favourable terms to marketers. It hardly makes business sense for any marketer to go through the rigours and risk of importing fuel when there is adequate supply at home. The refinery is a long-term investment with potential long-term gains. Imposing itself on the market overtly or covertly needs not be on its agenda.