DAPPMAN Warns of Market Monopoly as Dangote Refinery Gains Traction

The Nigerian association for depot and petroleum products marketers has sounded the alert about what they see as an increasing monopolistic trend within the country’s downstream petroleum industry.

The marketers cautioned that the prevalence of the Dangote Refinery might disrupt the market equilibrium if not prudently handled.

During an interview with TVC on Friday, Olufemi Adewole, the Executive Secretary of DAPPMAN, refuted claims about a “cabal” within the industry. However, he acknowledged that there are conflicting interests among privately-owned depots, whose operators have invested significant sums—measured in billions of naira—to ensure continuous fuel supply to Nigeria’s population throughout the years.

There is no cabal involved in the midstream and downstream activities from my perspective, since, based on the English definition of the term cabal, it refers to something negative and subversive. No cabal exists. However, I can confirm that we do have vested interests.

My stakeholders have significant investments in this sector. If they’ve put billions of Naira into it over many years and filled the void—acting well ahead of Dangote—they stepped up when others weren’t around to make sure fuels reached Nigerian citizens. Naturally, they deserve proportional returns for their investment.

“Therefore, regarding this matter, I would assert that there isn’t a cabal involved; however, there are indeed conflicting interests at play,” Adewole mentioned during the interview.

His response follows comments made earlier by Aliko Dangote, president of the Dangote Group, stating that his $20 billion refinery continues to “struggle for existence.” According to him, this challenge arises from alleged sabotage orchestrated by established interest groups and oil industry factions opposing domestic refining efforts.

He mentioned that the struggle against established oil conglomerates, which started well before the refinery became fully operational, continues to this day. However, he remains confident about ensuring the refinery’s long-term success.

He highlighted that certain people who “have been making substantial profits for an extremely long period” from government-subsidized oil imports into Nigeria are the same ones attempting to undermine the 650,000-barrel-per-day oil refinery located in Lekki, Lagos.

“We continue our struggle, and this battle is far from over. However, I have spent my entire life in combat, and I am fully prepared and absolutely certain that victory will be mine when everything concludes,” he stated during an investment conference in Lagos.

Furthermore, the DAPPMAN representative emphasized that the Dangote Refinery, with its substantial 650,000-barrel capacity, has failed to satisfy the present lower domestic demand levels.

He contended that private depot owners still shoulder most of the responsibility for distributing fuel throughout the nation.

In his recent address at the Villa, the chief executive of the authority mentioned that the Dangote Refinery is failing to meet even the lowered domestic demand levels.

So, at present, Dangote Refinery isn’t able to keep pace with demand. Instead, it is us, the private depot owners, who have been filling this void and fulfilling the requirements of Nigerians.

He argues that halting the importation of fuel right now would lead to chaos and danger, suggesting instead that a gradual approach is more feasible when several domestic refineries become operational.

Adewole likewise voiced significant worry about what he termed a “present and looming threat” of monopolistic control, pointing out that Dangote’s extensive size grants them undue sway over market prices and distribution networks.

He observed, “Stopping imports immediately isn’t feasible; it would lead to chaos and monopolies. While this could theoretically happen, it should only occur once we achieve sufficient domestic production from multiple suppliers rather than relying on just one source.”

The potential for monopolies within the refining segment of the oil industry represents a significant and immediate threat. This topic has been under discussion, and we have thoroughly examined this issue.

Currently, we possess a refinery with a 650,000-barrel processing capacity. This facility stands out from competitors solely due to its size, pricing power, and throughput capabilities. It has the ability to control market prices, set terms, and achieve its objectives effortlessly. Therefore, this situation poses an immediate threat to our interests, and we prefer not to maintain such conditions.

The wonderful aspect is that our regulators have been performing exceptionally well since joining us. They ensure no organization strays from the guidelines set forth in the Petroleum Industry Act. This act guarantees a competitive marketplace where numerous participants can engage freely without allowing monopolies to form.

He mentioned, “It’s worth remembering that Dangote recently filed a lawsuit against the Nigerian Midstream Downstream Petroleum Regulatory Authority along with several other marketers. Their actions reveal their way of thinking, as they challenged the regulatory body’s authority, which is established under the PIA, to issue import permits for fuel distribution. It offers insight into how they perceive these matters.”

Therefore, the concern over monopolies is genuine, and we are collaborating with various parties to ensure this does not happen. We are also engaging with regulatory bodies, urging them to perform their duties effectively to prevent such occurrences.

He commended the Nigerian Midstream and Downstream Petroleum Regulatory Authority for upholding market integrity as mandated by the Petroleum Industry Act. However, he pointed out that Dangote Refinery’s recent lawsuit against the authority indicates an attempt to circumvent these regulatory safeguards.

They proceeded to court to contest the authority’s ability to grant import permits to other businesses. This reveals their way of thinking.

Adewole stated that when dealing directly with the refinery, DAPPMAN members feel they aren’t being offered an equal chance to buy products. He alleged that the refinery tends to favor selling exclusively to chosen marketers through gantry supplies instead of providing bulk loads from depots.

Dangote Refinery adopts a selective strategy. Our facilities in Calabar, Port Harcourt, and various coastal locations are prepared for large-scale pickups, accommodating volumes of up to 10,000, 15,000, or even 20,000 metric tons; however, loading onto ships is limited.

He revealed that significant price reductions following the departure of shipments from the loading platform have led many sellers to silently shoulder losses merely to remain operational.

We didn’t set out to create a stir. However, we’ve been facing the challenges head-on merely to stay viable and lucrative.

Adewole tackled the matter of pump pricing by outlining that the expense of petroleum products encompasses various components such as crude oil costs, refining margins, transportation expenses, and retail fees. He emphasized how operational inefficiencies and elevated financing costs contribute significantly to the ultimate prices consumers pay.

“Running depot operations is challenging. The equipment is outdated, and the financial outlay is substantial. For instance, importing 20,000 metric tons requires a marketing investment exceeding N20 billion. Much of this funding comes from banks with steep interest rates,” he noted.

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