Dangote and transformation of Nigeria’s energy market
Within the past five years, hardly has any dispensation impacted on the Nigerian petroleum industry as the advent of the Petroleum Industry Act (PIA), and now, the coming on stream of the Dangote Refinery. The PIA came in August 2021 as the statutory game-changer of the sector by calling the shots as the new normal […]
dangote
Within the past five years, hardly has any dispensation impacted on the Nigerian petroleum industry as the advent of the Petroleum Industry Act (PIA), and now, the coming on stream of the Dangote Refinery.
The PIA came in August 2021 as the statutory game-changer of the sector by calling the shots as the new normal for every operator. Expectedly, it faced challenges of enforcement and implementation as a once laid-back industry suddenly found itself challenged to rise up and comply with new rules of operation.
Similarly, on September 15, 2024, the Dangote Refinery came on stream with a refining capacity of 650,000 bd (barrels of crude oil a day), which is more than Nigeria’s daily consumption. With its capacity outstripping the combined capacities of the three moribund public owned refineries – Port Harcourt (210 bd), Warri (150 bd) and Kaduna (150 bd), along with the cluster of privately owned modular refining facilities, Dangote has come to represent something more than a mere petroleum refinery in Nigeria. Serving as a beacon of guaranteed self-sufficiency in refined petroleum products for Nigeria, it has become a monument of national pride.
Until Dangote refinery came on stream, the country’s petrol market had been in a bind for about five decades as petrol was literally always in short supply. Older Nigerians will easily recall that as far back as the mid-1970s, nationwide fuel queues were part of the country’s headaches. It was a common practice for motorists and other users of petrol to hoard the substance at home and other unsuitable locations with attendant contingencies. This was just as long-distance motorists often carried extra petrol in metal jerry-cans as the plastic variant was not yet in vogue. Needless to mention the attendant risks involved as not a few incidents of onboard fire outbreaks on the highways involving several vehicles occurred, with travellers in such situations often razed to death as they had no chance of escaping from the burning vehicles.
Endowed with such positive credentials as outlined earlier; and hence, iconic status, the entry of Dangote Refinery was clearly not to be a mundane affair. Little wonder then that ever since, there had been ripples in the sector associated with its advent.
First was the challenge of sourcing crude oil from Nigeria’s production of 2.3 million barrels a day, given that as much 40 per cent of such was already sold to the oil majors through the JVC contracts, while the NNPCL retained the balance for its operations. Hence not enough was available to furnish Dangote Refinery with its full requirement.
When it was mooted that the NNPCL was to sell crude to Dangote in naira, public interest was aroused as the news sounded like a lifeline was offered the facility to survive. Then came the matter of de-marketing of the refinery’s product as being of low quality before Nigerians. Along with the foregoing was the challenge of a rivalry between it and the NNPCL refineries. That was before the latest round of face-offs with the industry unions, which had raged for the past fortnight.
The present bone of contention is with the petroleum sector unions over the company’s plans to replace existing petroleum products distribution channels across the country with its own fleet of vehicles, cutting off middlemen from its network; hence the battle for the control of the vehicle drivers between Dangote and the industry unions like NUPENG and PENGASSAN.
It is significant that the challenges faced by Dangote and the unions this time are mostly market-related, being the issue of who supplies what to who consumes same, with each standing on what liberties provides it. The situation provides limited space for government to interfere with decisiveness outside the statutory provisions. While in some other instances of industry turbulence, the government could modify the situation by stepping in to read the riot act, in this case the conflict is between business rivals. The ultimate resolution lies with the interplay of market forces.
By and large, courtesy of Dangote Refinery, the Nigerian petrol, and by implication, the energy market, has transited from a state of stagnant demand, limited supply with escalating prices, to a condition of bumper supply and a price war among the suppliers comprising local refiners and importers. The future will not only be interesting but provides the opportunities for survival only to operators who will think out of the box. It is this new dispensation that needs to be interrogated and confronted, not Dangote. The refinery and its sponsors cannot be blamed for identifying a market opening in the country’s energy sector and decided to exploit same with the development of the refinery.
Rather than crucifying the facility and its sponsors, its traducers should see it as an inspiration for new ventures in the sector, built on the reality of Nigeria being capable of projects similar to Dangote Refinery. Dangote has proved that such can be done and Nigerians are waiting for other such facilities.
Beyond the foregoing is also the fact that market situations are not static forever. As businesses grow in capacity and sophistication, so their operational challenges also follow in tow. Even as the Dangote Refinery may seem as the ultimate for the country today, Nigerians should not rest on their oars as if it is Eldorado.
While the market may be saturated for now, the world still needs petrol as the substance is not naturally occurring and its demand is ever rising in both Nigeria and across the African continent for exploitation.
Perspectives and prospects of playing beyond the Nigerian market by any disposed operator is one major face of the transformation of the Nigerian petrol and energy market.