So what if Dangote’s Refinery is a Monopoly?
Nigeria’s oil industry is opaque and marred by endemic corruption.
At 650,000 barrels a day, Aliko Dangote’s gargantuan oil refinery in Lagos, Nigeria, is poised to shake up the Nigerian oil industry and the West African and global industries. Dangote is set to close down European refineries that produce and sell substandard, high-sulphur petroleum products to Western African markets like Nigeria. But some unpatriotic heathens in the Nigerian government aren’t happy with this coming revolution.
Farouk Ahmed, the CEO of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA for short, whose job is to license petroleum product importers in Nigeria, is one of those discontented with Dangote’s oil industry renaissance. In a recent war of words with Dangote, Farouk threw the dirty m-word, that’s monopoly, at Dangote — an accusation the billionaire is no stranger to. Prior to being accused of seeking a monopoly in crude oil refining, Dangote has been accused of maintaining a monopoly on cement production in Nigeria.
Farouk interpreted Dangote’s commonsensical push to end the importation of refined petroleum products into Nigeria as an attempt by the billionaire to monopolise the market for himself and his investors. Continuing with his apparent insanity, Farouk stated that it would be detrimental to Nigeria’s energy security to wholly rely on Dangote’s refinery for petroleum products. He insisted that refined petroleum products would continue to be imported into the country to prevent over-dependence on Dangote’s refinery.
A person oblivious to the Nigerian context may be swindled by Farouk’s false concerns about energy security. In reality, Farouk is an unpatriotic crook whose support for continuing the refined petroleum import regime stems from personal gains and not national interest. If the NNPC, which the NMDPRA was carved out of in 2021, fulfills its long-time promise of repairing the Port Harcourt, Kaduna, and Warri refineries, which have a combined capacity of 445,000 barrels a day, Dangote’s refinery wouldn’t be much of a monopoly now, would it?
Legally speaking, having a monopoly in Nigeria is not, in itself, wrong. A monopoly would be wrong under Nigerian competition law if it was acquired through anti-competitive behavior like predatory pricing or considered averse to public interest. In light of this, Dangote has not engaged in any known anti-competitive practice in building and starting operations at his refinery. At least the Federal Competition and Consumer Protection Commission, FCCPC, the government agency which, as the name suggests, is tasked with protecting competition and consumers, has not yet indicted Dangote refinery for engaging in an anti-competitive practice.
Also, how can you defend the position that Dangote refinery’s supposed monopoly is averse to public interest? First of all, the refinery will produce better quality fuel than the substandard, sulphur-rich rubbish brought into Nigeria by licensed importers whose profits matter more than the health of their fellow Nigerians. Secondly, Dangote’s refinery could save Nigeria billions of dollars in scarce forex used to import cheap fuel from Europe. It may even be a net forex earner as Dangote intends to export refined petroleum products. Thirdly, buying refined products from Dangote instead of importing them from places like Europe is in line with public interest as the economic activity that will employ people and generate tax for the government will go on in Nigeria.
Furthermore, Farouk’s idea that overreliance on Dangote’s refinery exposes Nigeria to energy security risks is contrary to geopolitics. Energy security risks are more likely to emerge from relying on other countries for your energy needs than relying on your domestic producers. Self-sufficiency is usually the goal. During the 1973 Arab-Israeli war, the United States suffered energy shortages as an oil embargo was placed on them by Arab states for supporting Israel. More recently, when the Russia-Ukraine war broke out in 2022, Europe had no option but to cut their reliance on Russian gas from a 2021 high of 41% to 15% in 2023.
Moreover, critics like Farouk Ahmed, who criticise Dangote for attempting to form a monopoly in the Nigerian oil industry are not cognizant of the wider global oil industry, where Nigeria doesn’t have a single national champion to brag about. The NNPC, but for corruption and mismanagement, would have been Nigeria’s towering behemoth in the global oil scene, but it’s not.
As Dangote has, against many odds, managed to build a 20 billion dollars, largest of its kind refinery in Nigeria, the government, whose incompetence has created the opportunity for Dangote to be labelled a monopoly, should either shamefully hide its head in the sand or do all it can to make sure that the Dangote Refinery’s cause is Nigeria’s cause. Having said this much, my question to Farouk Ahmed is: So what if Dangote’s refinery is a monopoly?
