Building Nigeria’s energy future depends on fair play and not monopoly – Businessday NG

Nigeria stands at a crossroads. The recent rise of the Dangote refinery, a $20 billion marvel of engineering capable of refining 650,000 barrels of crude daily when fully operational, is a triumph for Nigeria’s industrialisation and energy future. But there is a brewing crisis.

At this moment, Nigeria does not have a robust regulatory framework to ensure competition, transparency and the long-term stability of Nigeria’s downstream oil industry. The Nigerian government is risking one dependency it has demonised so much, importation, for another: monopoly. Unless it can perform an urgent recalibration of its approach to the petroleum industry, Nigeria might find itself in a problem in the future.

Dominance without guardrails

The Dangote refinery is undeniably consequential and transformative to Nigeria’s today and future. Nigeria can refine diesel, aviation fuel and petrol. This milestone can potentially end Nigeria’s reliance on petrol imports. But with great power comes great responsibility. This responsibility is not only for the refinery but the regulators. The refinery now controls an estimated 90 percent of Nigeria’s refining capacity. But this dominance, despite being economically rational, brings forward Nigeria’s systemic vulnerabilities.

The recent litigation reveals some of the vulnerabilities. This year, the refinery sued the NNPC and the Nigerian Midstream and Downstream Petroleum Regulatory Authority, seeking an end to petrol imports. The refinery argued that its output was enough to meet local demand. But the NNPC countered that imports were necessary to bridge gaps. Experts, on the other hand, warned that banning imports prematurely would risk creating a monopoly, stifling competition and eventually leaving customers to the whims of a single supplier.

This litigation is a symptom of a deeper sickness; Nigeria’s regulatory framework is reactive, fragmented and not fit for purpose to foster fair competition. But this is not necessarily by design–this is the first time Nigeria is seeing a company at such a sheer scale to cause problems of such a magnitude.

Regulatory frameworks built for crisis and not prevention

Nigeria’s Federal Competition and Consumer Protection Commission (FCCPC) operates with a priority to punish abuse of dominance over preventing monopolies. As a consequence, there is a lag. When the regulators act, the distortions in the market might already be irreversible. The FCCPC’s power to investigate anti-competitive behaviour in Nigeria is often disrupted by delays in bureaucracy, vague timelines and, most importantly, overlapping mandates with bodies that are specific to sectors like the NMDPRA.

In the petroleum sector, there is a disconnect in regulatory coordination. The NMDPRA issues licences for petrol imports and regulates technical aspects of the industry, while the FCCPC oversees broader competition issues. Meanwhile, NNPC Ltd, a state-owned commercial entity and market participant with a 7.2 percent stake in the Dangote refinery, creates a complex market dynamic.

This complex regulatory environment may inadvertently create opportunities for market distortion. Dangote’s critics have accused the refinery of benefiting from preferential crude supply deals, while the refinery has accused its rivals of dumping substandard petrol into the market. A more cohesive approach to oversight would help address these concerns.

The need for robust regulatory oversight is underscored by recent contradictions in production reporting. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) stated that Dangote Refinery’s premium motor supply currently stands at 18 million litres daily, while the firm’s president, Aliko Dangote, claimed 57 million litres daily. This contradiction highlights several critical regulatory failures.

First, the lack of verified, transparent production data hinders informed policymaking and market operations. Second, these discrepancies could potentially indicate market manipulation through misleading claims, which directly affect fuel prices and availability for consumers. Lastly, without adequate verification powers, regulators cannot effectively oversee the market, allowing for narrative-driven rather than evidence-based decisions on critical matters such as import policies.

These contradictions don’t just confuse the public; they erode trust in both regulators and operators. Without transparency, markets are vulnerable to manipulation. A robust regulatory framework must incorporate mechanisms to independently verify production figures and guarantee information transparency as the foundation for a competitive market.

Proactivity over paralysis is the global model.

Effective regulation demands foresight. South Africa’s Competition Commission proactively reviews market concentration and mergers before market dominance becomes abusive. The EU and even America’s Federal Trade Commission have strict divestiture measures in sectors prone to monopolies.

While FCCPC already has the statutory authority to monitor market concentration and approve mergers, it would benefit from strengthening its implementation capacity to fully exercise these powers. The Commission should leverage its existing mandate more effectively to conduct regular market assessments, especially in critical sectors like petroleum.

To bridge regulatory gaps, enhanced coordination between the FCCPC and NMDPRA should be established to harmonise data sharing and enforcement. Additionally, transparent price trading mechanisms like fuel stockpile disclosures and crude pricing benchmarks should be adopted.

Competition drives innovation.

South Korea’s liberalisation of its refining sector brought a surge in innovation and consequently cost efficiency. Nigeria’s deregulated petroleum market must be paired with safeguards to ensure that smaller refineries and importers can thrive. This can be done by allowing imports to keep domestic prices competitive, the country building a U.S.-style petroleum stockpile and prioritising diversified suppliers to mitigate any supply-side shocks and strengthening and enforcing the NMDPRA’s capacity and mandate to test fuel standards.

The Dangote refinery is a national asset, but its success can’t hinge on controlling the entire supply chain and stifling rivals. Only when Nigeria has several refineries on the scale of the Dangote refinery might an import ban make sense.

Partnering with Dangote Refinery to protect Nigerians

The Dangote refinery is not the villain of Nigeria’s story; the sheer scale and technology of the refinery position Nigeria as a global refining hub. However, it operates in a system where market concentration poses challenges to fair competition. To foster a healthier competitive environment, the FCCPC should fully utilise its existing mandate to monitor market concentration and prevent abuse of dominance.

Price transparency in crude supply deals between NNPC Ltd and refiners must become standard practice. The NMDPRA should receive adequate funding to effectively enforce technical regulations and perform independent quality testing. Finally, the government should encourage investment across the entire supply chain through tax incentives and streamlined licensing.

Nigeria’s energy future cannot be treated as a zero-sum game. The Dangote refinery can thrive in a competitive and transparent market. Price stability, innovation, and energy security are dividends of fair play in the market. We must strengthen the implementation of existing regulatory frameworks so every player succeeds because the rules work, not in spite of them.

Olawunmi is a public administrator and strategist working in the intersection of energy and economic sustainability.