Dangote Oil Industry Foray

….A bold step but at what cost

By Irving Zulu

Aliko Dangote, Africa’s richest man’s venture into the oil industry promised a biggish hope. With his $20 billion refinery, his coming seemed messianic; the advent of a saviour that promises a boost in Nigeria’s refining capacity and possibilities of a significant drop particularly in the pump price of premium motor spirit, pms, otherwise known as petrol and diesel.

Yet, industry insiders and experts warned of worrying trends due essentially to the manipulative strategy of witheringly scornful and outrightly false accusations against stakeholders in the oil industry by the refinery management. Dangote’s business tactics, they claim, threaten to destabilize the sector and potentially create a monopoly.
Then came Sunday, September 15, 2024. The much talked about Dangote petrol was unleashed on the Nigerian market, via a sole off- taker, the Nigerian National Petroleum Company Limited, NNPC.
What was supposed to be a momentous occasion on the energy landscape turned out an anti-climactic debacle, a disappointing denouement and a failed spectacle.

Ademola Ishola, a legendary multiple awards winning energy writer and a winsome Public Relations Consultant, captured the reality of stakeholders’ concerns and the shattered dreams of Nigerians in his feature on THISDAY online titled “Petrol Price Debacle: Options before the nation”.
In his seminal words, “One week after the roll out of the much expected gasoline (aka petrol) from the fuel loading gantry of the behemoth Dangote Refinery, the disquiet caused by the price template that accompanied the arrival into the market is far from abating. “To the ordinary Nigerians and indeed, many in the middle and upper echelon of the society who had expected that the locally produced fuel would come with a price regime that would ease the pains of high cost of the imported ones, the prices announced by the NNPCL was not just an anti-climax to the much awaited succour, but additional afflictions to an already debilitating financial ailments”.

Ishola was indeed referring to the NNPCL release of the pump price of fuel from the Dangote Refinery which was put at an estimated N898.78 per liter. But within a few hours the price was made public, Dangote Refinery reacted with a peppery press statement that practically projected NNPCL to have either distorted, manipulated or outrightly fabricated the price of PMS dispensed by its refinery.

The Dangote Group Chief Branding and Communications Officer, Anthony Chiejina, described the price as “misleading, mischievous, and designed to undermine the Refinery’s milestone in addressing Nigeria’s perennial energy crisis.
“We urge Nigerians to disregard this malicious statement and await a formal announcement on the pricing by the Technical Sub-Committee on naira based crude sales to local refineries …which will commence on October 1, 2024, bearing in mind that our current stock of crude was procured in dollars”.

Dangote Refinery’s blistering attack on NNPC was a tragic reversal for a historic day that Dangote’s fuel was supposed to light up a nation perpetually in darkness. Instead, it fueled fear, worries and acerbic remarks.

Worse still, all the denials turned out to be sheer rhetoric as the refinery has kept an icy silence over the actual price it sold to NNPC even if the crude was procured in dollars. Now, PENGASSON Chairman, Comrade Osifo has finally revealed to Nigerians, in an interview on Channels Television, that if fuel marketers had bought petrol directly from Dangote Refinery, fuel pump price would shoot over N1,100 per litre.
By its own making therefore, Dangote, the expected oil messiah arrived the scene and regrettably lived up to the perceived alarm bell of a chaos foretold. His ruthless pursuit of market dominance has sent prices into a frenzy that has climaxed in a cliff hanger, sparking widespread fear and deep seated concerns among stakeholders. A refinery touted as a game-changer has sadly become a ticking time bomb.

As Professor Johnson (surname witheld) puts it in an online platform, “Dangote’s accusations of sabotage against NNPCL, regulators, government agencies, marketers and even the federal government are baseless and divisive.
His finger pointing is intended to deflect attention from his own questionable business practices. ” ” His complete inability to engage in constructive dialogue with leading stakeholders has created an atmosphere of hostility and mistrust”, Johnson stated emphatically.

In his reaction on THISDAY newspapers to the squabble and growing enmity between Dangote and the regulatory authorities, the President of Africa Development Bank, ADB, Adewunmi Adesina stated that “it is shocking and creating bad waves for Nigeria globally.”

But in its editorial titled “Resolving the feud between Dangote and oil sector regulators”, Premium Times underscored the implicit hypocrisy, blackmail and manipulative agenda that infinitely define Dangote’s business strategy. Writing about the rift between him and the Authority Chief Executive Officer of Nigeria Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, Engineer Farouk Ahmed, it stated,

“The regulator (Farouk) also accused the Dangote Refinery of monopolistic reflexes, with just a few weeks to unleashing its premium motor spirit (PM) or petrol. In clear terms, the President of the Dangote Group which owns the Refinery, Aliko Dangote, expressed his concerns at the issuance of new import licenses to market players when his refinery can actually meet local demand “.
From the above, it becomes clear, that Dangote’s accusation of the NMDPRA for what he called indiscriminate issuance of licenses to import dirty fuel and not buying from his refinery was just a pretext to achieve a monopolistic ambition.
Analysts insist that Dangote and his management team appear totally unware of the basic operations and laws guiding the trade that Africa’s richest man took a plunge into with staggering financial investment.

A fuel marketer for instance affirmed that nearly all the marketers associations have been buying petroleum products from Dangote Refinery, “over 518,500 metric tonnes, MT, of Automotive Gas Oil, AGO, and JetA1.
Indeed, documents sourced from NMDPRA showed that between April and September, marketers lifted 489,500 MT of AGO, and 29,000 MT of Jet A1 distributed across various Nigerian ports, with 17 AGO shipments to Lagos, 6 to Warri, 2 to Port Harcourt and 1 to Calabar. All the 3 Het A1 shipments were discharged in Lagos.

“It saves us logistics nightmare. It is in our country. We have no qualms at all with Dangote “, said another marketer. “But the truth is that there is no law that compels anyone to do business with any particular company here in Nigeria or abroad.

The fuel marketer hinges his argument on the Petroleum Industry Act, PIA 2021, which replaced the Petroleum Act of 1969. In section 82(1) which deals with Freedom to Buy or Import Petroleum Products, the PIA states that “A person may buy or import petroleum products from any willing seller” while (2) affirms that petroleum products shall be sold at prices determined by market forces”.

Close oil industry observers noted that the above subsections of the PIA should make stakeholders to always prioritize collaboration, friendship and harmony in partnership. They insist that the recent intense competition, rancour, and predatory practices in the industry hinder growth, fuel instability and undermine the sector’s potentials. They advised Dangote to discard practices that some stakeholders consider predatory, and overtly stifles competition.
But some stakeholders and in particular regulatory agencies and marketers express concerns about the Dangote Refinery management’s consistent failures to adhere to the dictates of the law because they seem overtly driven by insatiable appetite for dominance and monopolistic instincts

They point to a publication by the Punch newspaper on September 20, with the headline, Dangote officials and refiners tackle marketers over imported pms “. Quoting a Dangote Refinery official that pleaded anonymity, the newspaper wrote, “These people (marketers) are importing dirty fuels that are toxic…. If allowed they will not stop”. This was then followed by what a marketer called a veiled threat. “They want the game to continue but the game will not continue”, the anonymous official warned.

The marketer then asked, “What game? Are we under any compulsion to buy from one source? How could one man be so aggressive, so desperate to dominate an industry”, he asked.
Indeed, Section 12(1) of the Petroleum Industry Act, PIA, “Prohibits any person or entity from engaging in monopolistic practices”.

The Federal Competition and Consumer Protection Act, FCCPA, in facts compliments the PIA on restriction and monopoly. Section 55(1) prohibits agreements that restrict competition and control or dominate markets “while Section 85(1) empowers the NMDPRA to “promote competition in the midstream and downstream sectors”. And in 85(2), the PIA states clearly that “The Authority ( NMDPRA) shall ensure that no person or entity engages in anti-competitive practices”.

The stakeholders urged the regulatory bodies therefore to take steps to enforce these antitrust laws. They are piqued by what they claim to be Dangote Refinery’s manufactured controversies and emotional manipulation. They loathed the refinery’s continued use of emotive appeals to sway public opinion rather than facts and then hoodwinking some reputable media houses into creating provocative and misleading stories.
They refer to the Punch publication of September 20. Quoting “an impeccable source at the Dangote Refinery”, the newspaper wrote, “They are importing substandard fuels and if allowed, they will not stop. We have more than enough but these guys don’t want it”, the anonymous official stated.

“This is the issue I have with Dangote and his team. They create unnecessary disputes and outright lies”, an NMDPRA insider stated.
“This was how they told Nigerians that they would supply our domestic market with 20million litres of fuel daily. This will translate to 140million litres weekly. But today as we speak, they are struggling to do about 40million litres weekly, a shortfall of about 100million litres, he stressed. “If NNPC had relied 100% on Dangote Refinery’s pledge, we would have run into major fuel crisis”, the NMDPRA source stated.
In all, despite all the accusations levelled against Dangote and his refinery, one fact seems clear. And it is that the man, Aliko Dangote, remains a disruptive change agent that drives transformative change within industries, using unconventional approaches. His visionary thinking and courage to challenge status-quo with strategic risk taking is undoubtable.

Above all, the transformative promises and possibilities of his refinery are irrefutable.
But to transform these promises into a concrete reality, the Dangote Refinery management must strive to comply with the Petroleum Industry Act and other regulatory requirements governing Nigeria’s oil industry. The allegations against the Refinery including continued accusations of monopolistic intent, media manipulation and misrepresentation of the fuel marketers are dire and concerning. The management must demonstrate commitment to transparency in operations and sales data, ensure fair business practices and competition.

The Dangote team has to build relationships based on mutual trust, respect and understanding even with the prevalent competition.

By embracing harmony and collaboration, the refinery will be playing a key role in Nigeria’s quest to actualize its oil industry full potential, drive economic growth and ultimately, improve the lives of Nigerians.

*Zulu, an Oil Industry Analyst, wrote in from Abuja.