The Nigerian downstream petroleum sector is facing potential upheaval with the emergence of the Dangote Refinery, a behemoth with a 650,000-barrel per day capacity. While hailed as a potential game-changer for local refining, concerns are rising among existing players about the refinery’s potential to monopolize the market, stifling competition and ultimately harming consumers. The Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) has voiced these concerns, warning of the “clear and present danger” of a monopoly if the Dangote Refinery’s dominance is not carefully managed.
DAPPMAN acknowledges the significant investment and role played by existing private depot owners in ensuring consistent fuel supply across Nigeria, especially during periods of scarcity. These “vested interests,” as DAPPMAN describes them, have invested billions of Naira over the years to bridge the supply gap and maintain fuel flow to consumers. While dismissing the notion of a “cabal” working against the Dangote Refinery, DAPPMAN emphasizes the legitimate need for these established businesses to receive a fair return on their considerable investments. This perspective contrasts with allegations made by Aliko Dangote, president of the Dangote Group, who claims the refinery is “fighting for survival” against entrenched interests attempting to sabotage its operations. Dangote points to players who have profited from subsidized oil imports as the source of this resistance.
The core of DAPPMAN’s argument revolves around the sheer scale of the Dangote Refinery, which grants it unparalleled influence over pricing and supply chains. The association argues that such dominance poses a significant risk to market competitiveness and could allow the refinery to manipulate prices to its advantage. While acknowledging the potential for Dangote Refinery to eventually reduce reliance on fuel imports, DAPPMAN stresses the current inadequacy of its production to meet even reduced local consumption. This reliance on existing private depots further underscores the importance of maintaining a level playing field in the market. DAPPMAN advocates for a phased approach to reducing imports, allowing for multiple domestic refineries to come online before a complete halt to imports is considered. A sudden stop, they argue, would create chaos and solidify Dangote’s monopolistic position.
DAPPMAN’s concerns are further fueled by what they perceive as an attempt by the Dangote Refinery to circumvent market regulations. The refinery’s recent legal challenge against the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) over the issuance of import licenses to other marketers raises red flags for DAPPMAN. This action, they believe, indicates an intention to control the market and restrict competition. DAPPMAN emphasizes the importance of the NMDPRA’s role in upholding the principles of the Petroleum Industry Act, which promotes a free and competitive market. The association urges the regulator to remain vigilant and actively prevent the emergence of a monopoly in the downstream sector.
Adding to the complexity of the situation, DAPPMAN members claim they face unfair practices when attempting to purchase products directly from the Dangote Refinery. They allege that the refinery favors selective sales through gantry supplies to specific marketers, restricting access to bulk depot loading for DAPPMAN members. This preferential treatment, they contend, limits their ability to compete effectively and serve their customers. Furthermore, DAPPMAN members report instances of price slashing after cargoes leave the gantry, forcing them to absorb losses to maintain their operations. These practices, if true, would further consolidate Dangote’s market power and undermine the viability of smaller players.
Finally, DAPPMAN sheds light on the complex pricing structure of petroleum products, explaining the various layers of cost, including crude price, refinery margins, logistics, and retail costs. They highlight the additional burden of operational inefficiencies, aging equipment, and high financing costs, particularly for import operations, which significantly impact the final price consumers pay at the pump. These factors contribute to a challenging operating environment for petroleum marketers, further emphasizing the need for a fair and competitive market where all players can operate sustainably. DAPPMAN’s concerns underscore the delicate balance needed between fostering local refining capacity and ensuring a competitive market that protects consumers from the potential abuses of a monopoly. The regulatory authorities will play a crucial role in navigating this complex situation and ensuring a stable and equitable downstream petroleum sector in Nigeria.
