By Abiodun JIMOH
Nigeria’s oil industry has become the center of a heated debate over fair competition, as allegations surface against Aliko Dangote, who has been accused of attempting to monopolize Nigeria’s oil market by sidelining competitors and restricting supply options.
Recent statements by the Chairman of Dangote Group, critical of competitors and regulators alike, have triggered reactions across the energy sector, highlighting broader issues of market access, competitive pricing, and regulatory fairness in Nigeria’s oil industry.
Lekan Lemsworth, a market analyst, suggests that the recent accusations by Dangote reflect an attempt to strong-arm the market—a strategy he claims is out of sync with the complex, interdependent relationships within Nigeria’s oil supply chain. “Nigeria should have access to a range of supply options, such as local refineries or imports, to determine the most competitive and sustainable prices. Regulating a free market also ensures that all products adhere to national standards and all participants act responsibly,” Lemsworth explains, calling Dangote’s actions “a tissue of lies” meant to sideline other players in the industry.
In Nigeria’s oil sector, the Nigerian National Petroleum Corporation (NNPC) has maintained a balanced approach, fostering a network of collaboration among International Oil Companies (IOCs), local refineries, downstream providers, and marketers. However, the entry of Dangote’s large-scale refinery into this ecosystem appears to have disrupted these dynamics.
Despite his presence in other industries, Lemsworth argues that Dangote has underestimated the importance of alliances in the oil sector. “This is an industry built on trust and cooperation, and no single entity, however large, can control market prices unilaterally,” he notes.
Amidst the current climate, accusations flew when Dangote’s group issued a statement alleging that competing firms were undermining his refinery by blending substandard products, damaging its reputation as a supplier of premium fuel. This claim was swiftly countered by Pinnacle Oil and Gas, a major player operating in the same region as Dangote’s refinery. Pinnacle’s response argued for the benefits of a deregulated market, stressing that open competition drives better prices and ensures consumer choice. “Deregulated commodity markets work best with an open system of multiple sellers and buyers bidding to establish market price,” Pinnacle’s statement read.
Pinnacle’s retort echoed a sentiment shared by many in the sector who argue that Dangote’s actions are counterproductive in a free-market setting. Lemsworth explains that the value in Nigeria’s oil market lies in a broad network of producers and distributors whose collective goal is to secure the best prices for consumers.
He emphasizes that creating a monopoly would only drive up prices and force marketers to seek alternative sources, potentially increasing costs for Nigerians in the long run.
Moreover, with Nigeria’s Petroleum Industry Act (PIA) of 2021, which was designed to promote competition and attract investment, the attempt to centralize control within one private entity contradicts the spirit of the legislation. The PIA encourages multiple players to provide diversified supply lines, benefiting the industry and consumers alike. In the current market, companies like Pinnacle Oil, which boasts a significant daily loading capacity, contribute to this diversity by offering critical distribution services.
The market reaction is also informed by broader economic concerns. The ongoing depreciation of the naira has intensified the pressure to maximize foreign exchange earnings through exports, making Nigeria’s oil and gas sector a crucial revenue source. As Lemsworth points out, if Dangote’s refinery insists on exclusivity in a highly interconnected market, it could prompt competitors to shift focus toward international clients, potentially reducing foreign exchange inflows.
Interestingly, NNPC Ltd, often the subject of critique, has not directly responded to Dangote’s claims, despite possessing evidence that could disprove them. Instead, the NNPC has continued its role as a regulator and key industry player, working to balance the needs of local and international stakeholders. Lemsworth suggests that this silence reflects the NNPC’s prioritization of maintaining stability within the oil industry, in contrast to Dangote’s more aggressive approach.
The debate further underscores the risks of trying to dominate a complex industry where partnerships often outweigh direct competition. In recent months, Pinnacle Oil has called for collaboration rather than confrontation. Their position proposes a practical solution that could benefit all players in Nigeria’s oil sector: a mutual agreement that aligns with global best practices. This approach would allow Dangote to work alongside competitors to improve the supply chain without alienating other players or risking regulatory intervention.
Should Dangote wish to optimize his refinery’s role within the Nigerian market, Lemsworth advises that he consider forming partnerships with key players such as NNPC, Pinnacle Oil, and other regional distributors. An open supply model that integrates multiple stakeholders could potentially yield better outcomes than a monopolistic strategy, which could alienate buyers and undermine consumer confidence.
In addition to the ongoing issues with Dangote’s approach, the reform measures under the 2021 PIA point to Nigeria’s commitment to a transparent and competitive oil market. As Pinnacle Oil noted in its statement, “Nigeria should have access to a range of supply options, such as local refineries or imports, in order to determine the most competitive and sustainable prices.” The expectation is that deregulation will empower Nigeria’s oil industry to function as a free market where competition and fair pricing drive consumer satisfaction.
Meanwhile, industry analysts warn that if Dangote persists in monopolistic practices, he could risk regulatory scrutiny. Lemsworth emphasizes that monopolies are not only frowned upon but are actively discouraged in deregulated markets. Nigeria’s energy sector, with its rich history of balancing local and international players, could face significant disruption if Dangote’s refinery attempts to enforce exclusive supply agreements that diminish market competition.
The debate between monopolistic control versus a competitive free market has critical implications for Nigeria’s economic trajectory. With foreign exchange in high demand and fuel prices subject to global fluctuations, the country can ill afford inefficiencies arising from market imbalances. Allowing a single entity to dominate could lead to inflated prices and reduced access, an outcome that deregulation seeks to avoid.
For Nigeria’s oil market, the path forward seems clear: fostering a regulatory environment that balances competition with cooperation. With multiple voices, including Pinnacle Oil, calling for open-market principles and fair competition, Dangote’s approach appears increasingly unsustainable. Should he choose to adopt a collaborative stance, his refinery could become a vital part of Nigeria’s oil ecosystem, aligning with the broader goals of the PIA and contributing to an equitable market structure.
The broader Nigerian public, meanwhile, will be watching closely to see if the market remains competitive, as monopolistic tendencies often lead to higher prices and diminished choice. For now, Pinnacle’s position and the wider industry sentiment suggest that the market is best served by embracing deregulation, with consumer interests at its core.
