Article Summary

  • The Dangote refinery will be commissioned today, May 22.
  • This expert believes that the government and the NNPC should allow only private sector players to effectively manage Nigeria’s downstream sector following the commissioning of the Dangote refinery, which is in the midstream sector.
  • Through the failure of the Kaduna, Warri, and Port Harcourt refineries, the government has shown that it is incapable of handling the midstream sector, and Nigeria now has an efficient private sector manager in that sector. So, the downstream should also be left to other private sector managers while the government regulates activities.

The Federal Government needs to allow private sector players to access petrol directly from the Dangote refinery, which will be commissioned today, May 22. This is according to Dan D. Kunle, an oil and gas expert. He said this on Sunday evening during an interview via Arise TV.

During the interview, Kunle said that although the Federal Government and the Nigerian National Petroleum Company Limited are still active players downstream, the Dangote refinery sends a signal to them to stop participating in the downstream.

He maintained that they should allow the private sector players who have invested their money over the years in building petrol stations across the country to access petrol directly from the Dangote refinery or through the depots across the country. He said:

  • “The government should not spend government money to compete with the private sector. The capacity of this refinery will make us very dominant in Nigeria and the regional market. The refinery is here to de-bottleneck and break the jinx between the upstream and downstream.”
  • “The midstream is going to be run by an efficient private sector manager. We should not take the product from the refinery and give it to the government, let it go straight to the people who have invested in the downstream sector over the years because they are currently being crippled by the NNPC and the federal government.”

According to Dan Kunle, the government is incapable of running any part of the oil and gas sector and should leave it to private sector players. He provided an example with the attempted privatization of the Port Harcourt and Kaduna refineries, which were reversed and still could not work. He said:

  • “Port Harcourt and Kaduna refinery were privatized by the Obasanjo regime in 2006/2007. Dangote was part of the consortium that bought the Kaduna refinery, and the regime that took over from Obasanjo retrieved the refinery back from the consortium and said they would fix the refinery. And within two years, if the refinery is not fixed, they will return it to the consortium.”
  • “Till today, the refinery has not been fixed. Dangote, in his motivated lifestyle, insisted that he was going to own a petrochemical refinery in this country, and he has now done it.
  • Allow the private sector to drive the economy of this country; the government should set up a strong regulatory framework to nurture private sector businesses. The government can encourage what Aliko Dangote has done in any other sector in this country.”

Kunle also provided an example with the Warri refinery, which has a petrochemical plant and a black carbon plant that is supposed to produce raw materials for the tire industry. Meanwhile, the refinery has been inactive for years.

Possible Violation of Anti-Competition Rules

While addressing the issue of a possible violation of anti-competition rules, Dan Kunle said that competition and innovation are games of free entry and free exit.

According to him, if one private sector player has succeeded in building a refinery alongside other modular refineries by other companies such as Walter Smith, then there is no barrier to how many of these refineries can be built.

He emphasized the fact that Dangote has not stopped the Federal Government and the NNPC from fixing the local refineries or for other private sector players to establish more refineries. He said:

  • “If a private sector player has built a refinery from 2014 until now, of that size, then why should anyone complain about a monopoly? Nobody has stopped you from building another refinery.
  • Anyone who assumes that because Dangote has a 650,000 barrels per day capacity refinery, there is now a monopoly in the market, is wrong.”

Meeting 100% of Local Requirements

During the interview, Dan Kunle said if he knew the exact amount of petrol Nigeria consumes per day, he would be able to give a definite answer whether the Dangote refinery can meet 100% refined product requirements in the country.

But, according to him, no one knows the exact amount of fuel the country consumes per day because the market players have released various figures over time.

However, he said that the Dangote refinery take-off may now help the country know the exact volume of fuel consumed per day since there will be no more import racketeering.

What You Should Know

Also, while addressing the issue of petrol smuggling to other African countries and how the Dangote refinery could impact smuggling activities, Dan Kunle said that the problem has always been a lack of capacity.

  • According to him, Nigeria has an advantage in land mass, and if we industrialize, we can easily annex those smaller countries and give them what they need at competitive prices, so they don’t need to import from anywhere in the world.
  • They will just look up to Nigeria as the host country for sub-regional Africa. He believes that Nigeria is now ready to play a big-boy role in Africa through petrol and petrochemical output, by virtue of the Dangote refinery, which has a lot of value chain effects.