• The legal battle for control of Nigeria’s fuel market
• Dangote refinery now supplying bulk of domestic jet fuel — Report
'Seun Ibukun-Oni, Abuja
Dangote Refinery in a striking legal confrontation, is positioning itself at the center of Nigeria's fuel market, asserting its dominance as it seeks to annul import licenses granted to several competitors.
The refinery's legal actions signal a broader narrative of monopolistic tendencies within the country’s burgeoning oil sector, raising questions about competition and market fairness.
The Dangote Business Empire
Aliko Dangote, Africa’s richest man, has long been a pivotal figure in Nigeria's economy. His conglomerate spans multiple sectors, including cement, sugar, and recently, oil refining, with the Dangote Refinery boasting a staggering capacity of 650,000 barrels per day. This multi-billion dollar investment is not just a refinery; it is a critical player in Nigeria’s quest for energy independence, producing a significant portion of the country's jet fuel and other refined products.
The Legal Challenge
Recently, Dangote Refinery initiated a court case against the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and several other companies, including the Nigerian National Petroleum Company Limited (NNPCL) and Matrix Petroleum Services Limited. The refinery contends that the issuance of import licenses to these companies violates the Petroleum Industry Act, as there is no demonstrated shortage of refined products domestically.
Dangote’s legal team argues that the NMDPRA’s actions are detrimental to the refinery's operations, asserting that their substantial investments into domestic production are undermined by competition fueled through government-sanctioned imports. The company has sought ₦100 billion in damages, alongside a demand for the court to prohibit further issuance of import licenses, citing a need to protect a free market environment that supports competition.
Market Dynamics and Implications
Since commencing operations, Dangote Refinery has rapidly become a dominant supplier of jet fuel in Nigeria, accounting for nearly two-thirds of the local market. Reports indicate that its fuel is not only competitively priced but also more reliable than imports, leading local airlines to prefer Dangote’s offerings. This shift has sparked concerns among industry players about potential monopolistic control over the fuel supply chain.
The implications of this legal battle extend beyond the courtroom. If the refinery succeeds, it may cement its position as the primary supplier of refined products in Nigeria, reshaping the competitive landscape. Industry observers are closely watching how this situation will influence fuel prices and supply stability, especially given recent trends indicating a significant drop in Nigeria's fuel imports.
A Struggle for Fair Competition
Dangote’s claims of unfair practices come amidst growing criticism of the regulatory framework governing Nigeria’s oil sector. While the refinery pushes for a more favorable regulatory environment, questions linger about the balance of power between large players and smaller companies. The assertion that government licenses should reflect genuine market needs rather than preferential treatment could redefine competitive dynamics in the sector.
Dangote Refinery Now Supplying Bulk Of Domestic Jet Fuel — Report
Meanwhile, oil marketers have said that the bulk of jet fuel consumed locally is now being supplied by the Dangote Refinery.
According to a report by Energy Intelligence, jet fuel marketers say fuel from the 650,000 barrels per day Dangote refinery make up the bulk of jet fuel utilised locally, less than six months after it began production.
“We’re already buying from Dangote [now] it’s slightly cheaper or at least the same price as imports,” Asharami Synergy’s managing director, Foluso Sobanjo, told Energy Intelligence in an interview this week. The downstream subsidiary of Sahara Group is now Nigeria’s leading airline fuel supplier with a market share of over 20%.
Sobango reckoned that the Dangote jet currently goes for a $2-$3 per metric ton discount to imports.
He pointed out that the 10,000-20,000 ton “coaster” volumes available regularly from the plant are also much more convenient.
“Prices have fallen as the plant has ramped up production — despite large volumes of Mideast and Asian jet fuel passing right by the Nigerian coast on the way to Europe. Sources say Dangote is now operating at more than 300,000 b/d and finally began selling gasoline last month.”
Industry Clarification
The clarification came after the Airline Operators of Nigeria approached Aviation Minister Festus Keyamo last week, demanding that they would henceforth, prefer to purchase Dangote’s jet fuel.
The meeting later sparked local press reports, alleging that Keyamo had mandated Dangote as the country’s sole domestic jet fuel supplier.
Sobanjo also corrected local reports that Dangote had started selling jet fuel locally in naira.
Domestic petrol and diesel sales switched to the local currency, after a government-brokered deal for Dangote to buy Nigerian crude in naira.
While the jet is still sold in US dollars per ton for the time being, that could soon change, he said.
“By eliminating the influence of international market fluctuations, we can stabilise the price of jet fuel, which will now be clearer and cheaper as payments will be made in naira,” Keyamo was also quoted as saying.
Shifting Trade Flows
Dangote has shipped 1.1 million tons (35,000 b/d) of jet overseas since it began exports in March, according to Kpler tanker tracking.
That includes almost 290,000 tons of jet sent to Europe and 315,000 tons to South America, with the rest mostly staying in West Africa.
Exports have tailed off slightly since September in line with higher domestic sales.
Energy Intelligence calculated that since April, an additional 94,000 tons of Dangote jets have been shipped to other ports in Nigeria, mainly Lagos. The refinery’s management had previously suggested around three-quarters of Dangote jet production would be sold by sea with the rest loaded onto road tankers heading inland.
Dangote jet now makes up at least two-thirds of Nigeria’s jet fuel supply and almost half of the fuel used across West Africa, according to Energy Intelligence calculations.
Nigeria’s jet fuel imports have collapsed from 13,000 b/d last year — when they made up all of the country’s supply — to just 5,000 b/d so far in 2024. Jet imports into West Africa from outside of the region have similarly dropped from 34,500 b/d in 2023 to just 17,900 b/d so far this year. Loading schedules show Dangote jet heading to Benin, Senegal, Togo, the Gambia and Gabon in the region. Dangote’s owner has previously said the plant will eventually produce enough jet fuel to supply all of Africa.
Local fuel marketers had warned that Dangote would not necessarily solve the problem of regular stock-outs at the capital’s Nnamdi Azikiwe International Airport in Abuja, which relies on road tankers for 100% of its supply. But “there have been no supply disruptions in Abuja this year,” says Sobanjo.
He attributed the stable supply chain to a lighter rainy season which has kept roads passable.
Conclusion
As the legal proceedings unfold, the narrative surrounding Dangote’s ambitions will likely continue to attract scrutiny. With Nigeria’s energy future at stake, the outcome of this battle could have lasting implications for market competition, consumer prices, and the overall health of the oil industry in Nigeria. In a landscape marked by a few dominant players, the question remains: can true competition thrive, or will the ambitions of one powerful entity stifle the market?