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Monday, July 15, 2024

The Dangote Refinery’s many battles

By Gbenga Johnson 

When Dangote Refinery, early this year, rolled out its diesel and supplied marketers at a substantially reduced  price of N1,200, Nigerians chanted, ” Bravo to Dangote”. This was because the N1,200 price represented about 30% reduction from the previous market price of N1,600. The refinery thereafter announced a further reduction to N1,000. 

The organization in a statement said ” the significant reduction in the price of diesel at the Dangote Petroleum Refinery is expected to positively affect all spheres of the economy and ultimately reduce the high inflation rate in the country “. The statement simply gave a nod to the hopes of Nigerians frustrated by the endless scramble for refined products with prices on endless ascendancy.

But this hope of Nigerians now look dim. This is because  in the last few weeks,  the sounds emitting from the management of the $19Billion refinery appears polluted and seems to rankle both its customers- the fuel marketers and the  authorities. 

The height of these worrying sounds was the accusation of the Nigeria Midstream and Downstream Petroleum Regulatory Authority,  NMDPRA, of issuing import licenses indiscriminately and allowing fuel marketers to import substandard products, what they called dirty fuel, into the country.

But in a rare  poignant reaction, the NMDPRA, which rarely joins issues with organizations under its authority, dismissed the Dangote Group’s claims. For instance, on the accusation of issuing import licences to marketers to import diesel when it , ( Dangote Refinery),  has the capacity to meet local demands, NMDPRA told the Dangote Group tersely that “deregulation of the downstream sector allows the marketers to source products from anywhere, whether locally refined or imported from outside the country”.

In the words of Ogbugo Ukoha,   the Executive Director, Distribution Systems,  Storage and Retailing Infrastructure, ” the marketers can make commercial  decisions on where to source their  products “.

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On the issue of importation of substandard products into the country, Ukoha opened up in a way that almost tacitly indicted the Dangote Refinery. First, he dismissed as false the claim of the Dangote Group that the sulphur content of the diesel imported into the country was below the average set by regulators. He then revealed how ECOWAS Heads of State in 2020 endorsed a Declaration that adopted the Afri-five fuel roadmap. This requires that certain diesel imported into the countries should have as minimum 50 parts per million, PPM, of sulphur content. 

However, while compliance with this Declaration was immediate for importers of petroleum products, local refineries were given up to December 2024 to fully comply. 

What this revelation by Ukoha means is that Dangote Refinery enjoys a special privilege. Sources indeed allege that Dangote Refinery’s Diesel has about 1,200 ppm of sulphur. So, you may be tempted to ponder over who should  be accused of bringing substandard products into the Nigerian market. 

There is no question that the government  needs to protect local refineries but this cannot be at the expense of the right of marketers to import. If the government  bans import as Dangote Refinery would like because it has the capacity to meet local demands, then the government would have enthroned the monopoly which is mortally adversarial to energy security.

Besides, if the Dangote Refinery alone brings to the market diesel with the alleged high level of sulphur content, the  hazardous effect on the environment and, indeed, Nigerians should be an issue of grave concern.

Indeed, to foist a monopoly on the industry will contravene the Federal Competition and Consumer Protection Act 2018, FCCPA, which seeks to ensure the development and promotion of fair and competitive markets in the Nigerian economy and to facilitate access by all to safe products. Even Nigerians would then begin to ask questions about the nation’s four major petroleum refineries that still lay comatose.
Deadlines by  governments for the refineries to commence operations have been a futile exercise. Nigerians would surely ask if these ineffectual and fruitless quests to revive the nation’s refineries  was aimed at enthroning some monopoly. 

In another strange development on the diesel question, the Dangote Refinery has been strongly accused by some marketers of selling diesel at a higher cost to local companies while foreign marketing companies buy at a much cheaper price. Therefore, while many local fuel marketers still buy from Dangote, some have argued that there is no incentive    to buy the diesel as it is neither cheaper nor  safer.

Added to this is the allegation that the Refinery’s management is calling depot owners to shut down their depots and load their products with trucks at the refinery. Let’s even assume that this is practicable ; it would mean that about 2,000 trucks in Nigeria would be driving daily to Dangote Refinery to load products. So you ask , what would be the impact on our roads, won’t it translate to instant destruction of these roads ? What about the road mishaps , the lives that would be endangered by this fatal siege on our roads. And perhaps to discourage depot owners, the Refinery transacts business at the refinery site in Nigerian currency while marine business is charged in dollars.

There is no question that the optics for the Dangote Refinery at the moment are not looking good. The management of the behemoth has spent the last three weeks or more calling out some unknown oil mafia, then International Oil Companies, IOCs, then the marketers, and then NMDPRA, accusing them of different things from selling crude oil higher than market prices to them and for encouraging import of dirty fuel through indiscriminate issuance of import licenses. Ironically,  the Chief Executive of Dangote Refinery, while speaking about the local and foreign mafia described himself as a fighter but stressed that he often won the fight because both the people and the government  were always on his side because he was always doing the right thing. 

If now the authority, the marketers, the people are not quite on his side,may be, maybe the time has come for the management to look inwards, to dissect its operational mode, strategy and marketing communication. The management needs to embark on a journey of rare retrospection.

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