Thursday, 4 March 2021

Another Monopoly: Dangote's Troubling Petroleum Industry Bill Proposal


The news of last weekend’s presentation to the National Assembly’s Joint Committee on the Petroleum Industry Bill, (PIB) by the Dangote Group, whose members visited the company, sent shock waves to the marrows of the Nigerian oil sector.

In the presentation, the Dangote Group had made a demand that oil import licence be given to only companies with active refinery licences. Chief Strategy Officer of the Group, Aliyu Suleiman, was quoted to have highlighted several recommendations by the company to the committee, among which was this ground-shaking demand.

“Nigeria is exceptional in being a major oil producer with near zero capacity. Though the Dangote Refinery will help address this, there could be periods when petroleum products may need to be imported, such as when the refinery is undergoing turnaround maintenance or if demand grows to exceed capacity. To support this, licence to import any product shortfalls should be assigned only to companies with active refining licences. Import volume to be allocated between participants based on their respective production in the preceding quarter. Such import will be done under the DSDP scheme,” Suleiman said.

The Dangote Group has had an octopodal hold on the Nigerian entrepreneurial and indeed, business sector. From sugar, cement, food items production and to its recent foray into oil production, the Group controls the major artery of entrepreneurship and business as a whole in Nigeria.

With this as background, it would be senseless to ignore whatever contributions the Group makes to the theoretical underpinning of any venture in Nigeria. Added to this is the group’s hold on the governmental class and its ability to blithely swing issues to its sides.

Today, Dangote’s in-road into the oil sector, with its Dangote refinery, is a phenomenal project that the Nigerian government and the people look forward to with baited breath. A 650,000 barrels per day (bpd) integrated refinery and petrochemical project, it is currently under construction at its location in the Lekki Free Zone near Lagos.

By projection, the refinery, upon completion, is primed to be Africa’s biggest oil refinery and indeed, the biggest single-train facility in the world. Its initial completion schedule was 2020, until time put spanners in its works and projected completion time currently indecipherable. There is yet to be an official communication of reasons behind the inability to meet this scheduled date and communication of the sure date that the project would begin to refine petroleum products.

The oil refinery, brainchild of the famous richest man in Africa, Aliko Dangote, is an estimated investment that is worth $12bn and a projected jobs generation of 9,500 direct and 25,000 indirect employments. Part of the oil productions that the Dangote Refinery will bring to table is the production of a variety of light and medium grades of crude. This will subsequently lead to the production of Euro-V quality clean fuels which also included gasoline, diesel, jet fuel and polypropylene.

In the roulette of epileptic fuel supply, the considered inappropriate importation of fuel products shipped abroad as crude, the Dangote Oil Refinery offers a binge of excitements to the Nigerian government and Nigerians in general. Upon completion, it was primed to hold the hope of rescuing Nigeria from the travails of refining petroleum products abroad and shipping same back to the country.

The Nigerian government had looked forward too, to the completion of the Dangote Oil Refinery as a way of ending this roulette of importation of petroleum products and shoring up its foreign exchange earnings. In December 2019, after a four-hour tour of the refinery, the CBN Governor, Godwin Emefiele, said that the federal government would soon start sourcing foreign exchange (forex) from the Dangote Group, after the completion of its refinery, petrochemicals and fertilizer projects are completed. He undertook the tour in company of the President/CE of the Dangote Group, Aliko Dangote; Deputy Governor of the CBN, Aishah Ahmad; Group Managing Director, Dangote Industries Limited, Mr. Olakunle Alake; Group Executive Director of Dangote Industries, Mr. Devakumar Edwin; and the Managing Director of Guaranty Trust Bank, Mr. Segun Agbaje.

In the euphoria of its huge financial leap expectations to Nigeria from the oil refinery business, the project was given very generous concessions by government, one of which is waivers and free access to foreign exchange from the Central Bank of Nigeria (CBN). Though this concession agreement violates the free enterprise rule of the Free Trade Zone policy of the Lekki Free Trade Zone where the Dangote Refinery is expected to operate, government and the FTZ looked the other way.

The strict rule that was manifestly pursued in respect of all ventures operating at the zone is that, every enterprise therein must raise forex by itself and such forex was free from excise duties, as well as nil restriction to the repatriation of the investor’s money if and when the investor deems it necessary. Literally, by getting waivers from the CBN, Dangote Refinery violated this major FTZ operational code but the Group enjoyed this exceptional treatment from the Nigerian government due to expectations from its completion of the refinery.

A few months ago, indications emerged from the Department of Petroleum Resources (DPR) that the Dangote Group might have made an application to the DPR to begin retail trading of petroleum products. In the oil and gas sector, retail trade involves the marketing and distribution and sale of petroleum products purchased wholesale or directly from retail outlets. If this application was granted, the Dangote Group would then have a dual involvement in this sector, or abandon one for the other as the two are not mutually inclusive.

Industry watchers had looked at this sudden veer into petroleum products trade as a huge digression from the known and advertised plan of the Dangote Group which is currently involved with the construction of a petroleum products refinery at the Lekki Free Trade Zone. There were strong indications that the Dangote Group’s veer into marketing and distribution of petroleum products might generally affect the local market and cannibalise it. Why oil products trading should be an agenda on the Dangote Group’s limitless entrepreneurial cravings baffled. If approved by the DPR, this about-turn by the Dangote Group could totally redraw the map of Nigeria’s petroleum products, foil expectations of the people and government and bring the country back to status quo ante.

This latest demand by the Dangote Group from the National Assembly’s Joint Committee on the Petroleum Industry Bill (PIB) beggars explanation. By this demand to have oil import licences given to only companies with active refinery licences, Dangote is seeking to consolidate on its advantageous position in the Nigerian business environment. Having secured huge concessionary from the federal government to build a refinery, the Dangote Group again seeks the bid of same government to monopolise the importation of fuel into the country. If this is granted, there would be a cloning of the same business model that has set the Dangote Cement in a rat race squabble with other producers in the cement sector.

Recall that only recently, BUA Group, a key player in the cement, through its founder, Abdul Samad Rabiu, had been involved in a spat with the private sector-led CACOVID for the purchase of one million AstraZeneca doses of COVID-19 vaccines for Nigeria via the AFREXIM bank for which it paid at the agreed rate of US$3.45 per dose totalling US$3,450,000,000.00 which translating to N1.311billion. However, CACOVID’s clarifications, BUA believed the uproar was due to petty politics, which watchers translated to fallout of the cement industry war.

With its backward integration policy application to the downstream petroleum sector, watchers of the industry wonder what then happened to Nigerian investors who have voted billions of naira into the same venture which the Dangote Group wants devoted to itself alone?

With a refinery construction project in process, why does the Group need to again dominate the importation of fuel business? This is because, its alibi of a periodic Turn Around Maintenance (TAM) of the refinery as reason why it should also superintend over fuel importation lacks cohesion and logic. This is because, TAM is a periodic process and when that happens, modular refineries in Nigeria could fill the gap to cushion the effects of the fuel supply disruption that may be trigger by the TAM.

Monopoly and Dangote Group, it will appear, are Siamese, with all its indications of anti-trust and done in conjunction with successive Nigerian governments when, in fact, it should compete with others. In specific terms, the submission of the Dangote Group on the National Assembly’s Joint Committee on the Petroleum Industry Bill, if incorporated into the PIB that is eventually passed, may not ensure equity and level playing field in the oil and gas industry.

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