Victor EzejaAs Dangote refinery finalises plans to begin direct distribution of petroleum products to end-users, oil and gas expert, Olabode Sowunmi, has called on regulatory authorities in the downstream sector to ensure fair competition to protect marketers.
Sowunmi made the call while commenting on the ongoing controversy between Dangote refinery and some groups of marketers over planned direct distribution of petrol and Diesel to retailers and other end-users across Nigeria.
Join our WhatsApp ChannelHe noted that Dangote is a dominant in the industry and warned that the regulatory authorities must provide room for fair competition to avoid market distortion.
He stressed the need for adherence to rules of business that engender fair competition, efficiency of supply and affordability.
Sowunmi, who appeared on Arise TV Morning Show on Tuesday, stated that the 650,000 barrels per day Dangote refinery has four components of operations, but is licensed to operate in only two components.
According to him, the refinery has been licensed to operate in the midstream and would need another licence from the regulatory authority for downstream operations, especially as it plans to start distributing petroleum products directly to end users through use of CNG trucks.
“The Dangote Refinery is a 650,000bpd capacity, but is only functional in two of the components,” Sowunmi stated.
“The components of the refinery are defined as priorities and they have been licensed to operate in only two of them. They are yet to apply for the licence to operate the other two, which means that they are operating at 650,000bpd capacity.”
He asserted that even if the refinery begins to operate at full capacity, it would not meet the demands of the country, making it imperative for the shortfalls to be supplemented by imports.
It would be recalled that groups like the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA) and Petrol Retail Outlet Owners Association of Nigeria (PETROAN) have complained about Dangote refinery’s direct distribution model, arguing that it would disrupt existing supply chains and could lead to job losses and product scarcity in the long term.
The oil and gas expert noted that both sides have genuine concerns. While Dangote is in business and is fighting for survival in a competitive market, marketers are worried that the move could displace them.
“Dangote is a dominant player. It is doing its own thing to survive — and it must be supported for that. However, other businesses must not die, and the potential for other businesses must not be terminated,” Sowunmi said.
READ ALSO: Dangote Fuel Distribution Strategy: Between Monopoly Concerns And Market Competition
While emphasising the need for adhering to the rules of business, he cited the historic 1911 US antitrust ruling that led to the unbundling of Standard Oil, giving rise to multiple companies, including ExxonMobil and Chevron, which he said would never have existed under a monopolised system.
He said the action highlighted the importance of rules for competition in the interest of the growth of the market and the future.
“In the case of Dangote, they have been licensed to operate in the midstream section; even the CNG trucks that they have, they still need to apply for a licence to operate at the downstream section.”
He said there are antitrust laws that exist in Nigeria, which empower the Federal Competition and Consumer Protection Commission (FCCPC).
He said there has to be a balancing act anchored by the regulator to ensure that both sides survive in the business.
Victor Ezeja is a passionate journalist with seven years of experience writing on economy, politics and energy. He holds a Master's degree in Mass Communication.
