It is crucial to start this by acknowledging the importance of Dangote Refinery as a turning point in Nigeria’s oil and gas downstream sector. For nearly 40 years, the country has relied on imports to meet its energy needs, even though Nigeria is a major crude oil producer and the government has built three refineries.
This situation has caused a lot of contention for the country, including the introduction of fuel subsidies to provide a cushion for impoverished citizens in the country at the mercy of international markets.
The completion of the $20 billion Dangote Refinery is a monumental achievement. With a projected capacity of 650,000 barrels per day, it is the largest single-train refinery in the world and a symbol of industrial ambition with the potential to change the lives of Nigerians for the better or worse.
The Dangote Refinery can become a catalyst for healthy competition, accelerating the development of the downstream sector, or a monopolistic force that stifles competition, dictates prices, and undermines the broader goals of economic inclusion. The direction the refinery takes will be decided by the actions of Nigeria’s regulatory agencies.
The Promise and the Peril
The Dangote Refinery promises to transform Nigeria’s energy landscape. We can already see the added benefits of local production in the stabilisation of the naira against the dollar as the country saves billions in foreign exchange and reduces its reliance on imported refined petroleum products. But, there have also been concerns about how the Dangote Refinery, which, despite its scale, intends to achieve vertical integration, will stay profitable without artificial market dominance.
The Dangote Refinery has already sought to disrupt the complex logistical network that ensures petroleum reaches final consumers by introducing a ‘free’ delivery service targeting major retailers, in a bid to incentivise them to ditch their long-term relationships with importers and depots and to buy products exclusively from the refinery. Industry stakeholders have condemned this move as predatory.
The Dangote Refinery has also been accused of abruptly lowering ex-depot petroleum prices and bearing the cost differential to undercut importers who cannot bear the losses incurred by this tactic. Already, many major importers and depots have been forced to shutter their businesses or risk bankruptcy. When challenged on the integrity of its tactics, the Dangote Refinery has defended its actions as healthy market competition.
It can lead to price manipulation, limit consumer choice, and create barriers for new entrants. In the absence of robust regulatory oversight, the very infrastructure meant to empower the economy could end up concentrating power in the hands of a few.
Mandate of Regulators
Nigeria’s regulatory bodies, particularly the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the Federal Competition and Consumer Protection Commission (FCCPC), and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), have a constitutional and moral obligation to safeguard the principles of fair competition.
It is their responsibility to ensure transparency in all business practices, monitor market behaviour and intervene when predatory actions are taken against competitors or consumers, even when they are legal. They must also enforce anti-trust laws and deter larger corporations from engaging in anti-competitive practices that marginalise smaller marketers.
But most importantly, it is their responsibility to provide a favourable environment for new entrants into the downstream sector, and by doing so, ensure the energy sector remains resilient and dynamic.
The Dangote Group is only as big and successful as it is today because regulatory agencies ensured indigenous entrepreneurs were protected from monopolistic manoeuvres from international competitors. The same consideration must now be extended to other players in the energy sector to balance industrial ambition and market fairness. The Dangote Refinery represents a significant advancement towards self-sufficiency, but that doesn’t exempt it from the same standards of accountability that any other market participant must adhere to.
Delicate Balance
Nigeria stands at a crossroads. The emergence of the Dangote Refinery offers a rare opportunity to redefine the country’s energy future. The refinery may be privately owned, but the market it operates in belongs to the people.
The future of the energy sector is the responsibility of the agencies tasked with ensuring that Nigerians reap the benefits of deregulation and that companies maximise the opportunities a free market offers Nigerian entrepreneurs. If local regulators rise to the occasion, they can ensure that this refinery becomes a cornerstone of shared prosperity, not a symbol of concentrated power.
Adebanjo, a lawyer and real estate advisor based in Lagos, writes on the intersection of law, real estate, and public policy