As a price battle unfolds between Nigerian National Petroleum Company Limited (NNPCL) and Dangote Refinery – the largest private refinery in Africa, the Nigeria’s fuel market is intensifying. Apparently, it’s a good news for the consumers but underneath, it poses serious discomfort about the fate of local refining, market equity, and of course Nigeria’s long-term energy security.
NNPCL’s decision to slash prices is at the core of the whole situation – a move many believe targets countering the rising influence of Dangote. The $19 billion-investment refinery by the richest black man – Aliko Dangote was presumed to curb the over dependence on imported fuel. However, before Dangote Refinery becomes fully established, this price cut could undermine it’s profitability and growth as the NNPCL coordinates fuel imports and supply chains of the industry. Another rising tension is that the owner of BUA – Abdulsamad Rabiu has mentioned that he’s planning to build a refinery in Akwa Ibom State, Nigeria, and this adds yet another layer to the ongoing fuel sector overhaul.
Although it appears to be like a win for Nigerians at the moment, however, it could pose a very serious problem. In a situation where Dangote Refinery becomes weaker enough to compete with NNPCL as a result of financial constraints, it’s productivity would be minimal and this will (once again) force Nigeria to depend upon imported fuel. Similarly, if BUA’s planned refinery faces exact same market pressures, private investors might not want to invest in Nigeria’s petroleum industry. Moreover, if NNPCL’s strategic move of underpricing it’s competitors to an extent of pushing them out succeeds, it could lead to the re-establishment of it’s fuel market monopoly and this do not only eliminate competition as it would eventually lead to price increase as soon as it regains it’s market position.
However, to resolve this problem, there needs to be a healthy competition as well as a fair market regulation. The government must also provide a level playing field where private refineries can succeed without being unjustly kicked out. This is achievable by employing transparent fuel pricing mechanisms, supportive policies for domestic refinery operators, as well as through step-by-step transition away from overreliance on fuel imports. Rather than a price battle that could jeopardise the the sector, NNPCL, Dangote, and other future players like BUA should concentrate on collaborative effort in order to assist Nigeria towards realising her dream of becoming fuel self-sufficient and foster a stable energy future.
