In a significant development that has sparked widespread debate in Nigeria’s energy sector, the Dangote Petroleum Refinery, a flagship project of the Dangote Group, has accused members of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) of demanding an annual subsidy of N1.505 trillion. The refinery claims that DAPPMAN is seeking this substantial financial support to align the prices of petroleum products at their depots with the refinery’s gantry price. This allegation has not only highlighted the ongoing tensions between the refinery and petroleum marketers but also raised critical questions about the sustainability of Nigeria’s petroleum supply chain, the economic implications of subsidy demands, and the broader impact on the nation’s energy sector reforms.
Background of the Dispute
The Dangote Petroleum Refinery, located in the Lekki Free Zone in Lagos, Nigeria, is Africa’s largest oil refinery and a cornerstone of Nigeria’s ambition to achieve self-sufficiency in petroleum production. Commissioned to address the country’s chronic dependence on imported petroleum products, the refinery has a capacity to process 650,000 barrels of crude oil per day. Since commencing operations, it has positioned itself as a game-changer in Nigeria’s energy landscape, promising to reduce reliance on imports, stabilize fuel prices, and contribute to the nation’s economic growth.
However, the refinery’s operations have not been without challenges. One of the most contentious issues has been its relationship with petroleum marketers, particularly DAPPMAN, which represents depot owners and marketers responsible for distributing petroleum products across the country. The latest allegations from Dangote Refinery point to a deepening rift between the two parties, with significant implications for Nigeria’s fuel supply chain and the broader economy.
Details of the Subsidy Demand
According to a statement issued by the Dangote Petroleum Refinery, DAPPMAN has demanded that the refinery absorb additional costs incurred by marketers when transporting petroleum products from the refinery to their depots. The refinery alleges that DAPPMAN insists on using coastal logistics to lift products, a method that incurs additional expenses of approximately N75 per litre. These costs include N70 per litre for coastal freight, charges imposed by the Nigerian Maritime Administration and Safety Agency (NIMASA), the Nigerian Ports Authority (NPA), and other related fees, as well as an additional N5 per litre for pumping petroleum products into vessels.
Based on Nigeria’s estimated daily consumption of 40 million litres of Premium Motor Spirit (PMS, commonly known as petrol) and 15 million litres of Automotive Gas Oil (AGO, or diesel), the additional cost of N75 per litre translates to a staggering N1.505 trillion annually. The refinery argues that DAPPMAN expects it to absorb this cost, effectively subsidizing the marketers’ operations to allow them to sell petroleum products at their depots in Apapa and other locations at the same price as the refinery’s gantry price.
The gantry price refers to the cost of petroleum products at the point of loading at the refinery’s gantry, before additional logistics costs are incurred. By offering products at this price, Dangote Refinery claims it is providing marketers with a cost-effective option to procure fuel without the burden of transportation-related expenses. However, DAPPMAN’s preference for coastal logistics, which involves shipping products by sea to depots, has led to the additional costs that form the basis of the subsidy demand.
Dangote Refinery’s Stance
The Dangote Petroleum Refinery has taken a firm stand against DAPPMAN’s demands, categorically refusing to either increase its gantry price or pay the requested subsidy. The refinery argues that complying with DAPPMAN’s request would perpetuate practices that have historically defrauded the Federal Government of Nigeria and burdened the economy with unsustainable subsidy regimes. For decades, Nigeria’s fuel subsidy program was marred by allegations of corruption, inefficiency, and exploitation, with billions of dollars reportedly lost to fraudulent claims and mismanagement.
In its statement, the refinery emphasized that marketers are free to lift petroleum products directly from its gantry, thereby avoiding the additional costs associated with coastal logistics. This “logistics-free initiative” is designed to ensure that marketers can access fuel at competitive prices, which would ultimately benefit consumers by keeping retail prices stable. By refusing to subsidize DAPPMAN’s operations, Dangote Refinery is positioning itself as a proponent of transparency and efficiency in Nigeria’s petroleum sector.
Furthermore, the refinery accused DAPPMAN of orchestrating a campaign of public criticism and attacks in response to its refusal to meet the subsidy demand. It suggested that the marketers’ actions are an attempt to pressure the refinery into capitulating to their demands, a move that Dangote Refinery has vowed to resist. The company stated that it remains committed to defending its position through all legitimate means, including legal action if necessary.
Economic and Operational Implications
The dispute between Dangote Refinery and DAPPMAN has far-reaching implications for Nigeria’s economy, particularly in the context of ongoing energy sector reforms. The refinery highlighted its role in supporting President Bola Ahmed Tinubu’s reform agenda, which includes the removal of fuel subsidies and the liberalization of the petroleum sector. By producing petroleum products locally, Dangote Refinery has helped stabilize the Nigerian Naira, cushion the economic impact of subsidy removal, boost foreign exchange earnings through exports, and create jobs across various sectors.
The refinery’s operations have also reduced Nigeria’s dependence on imported petroleum products, a longstanding challenge that has drained the country’s foreign exchange reserves and exposed it to global oil price volatility. According to the refinery, it maintains a monthly closing stock of 500 million litres of petroleum products in its tanks, demonstrating its capacity to meet local demand while also supporting exports. Between June and September, the refinery exported 3,229,881 metric tonnes of PMS, AGO, and aviation fuel, underscoring its contribution to Nigeria’s economy.
However, the refinery raised concerns about the activities of petroleum marketers, particularly their importation of 3,687,828 metric tonnes of petroleum products during the same period. Dangote Refinery described these imports as “dumping,” arguing that they are harmful to Nigeria’s economy. The importation of petroleum products, despite the availability of locally refined fuel, undermines the refinery’s efforts to achieve self-sufficiency and could weaken the Naira by increasing demand for foreign exchange.
Broader Context: Nigeria’s Energy Sector Challenges
To fully understand the significance of this dispute, it is essential to examine the broader context of Nigeria’s energy sector. For decades, Nigeria has grappled with inefficiencies in its petroleum industry, including inadequate refining capacity, reliance on imports, and a controversial fuel subsidy regime. The removal of fuel subsidies in 2023, under President Tinubu’s administration, was a landmark decision aimed at addressing these challenges. However, it led to a sharp increase in fuel prices, sparking public discontent and placing pressure on stakeholders to find sustainable solutions.
The Dangote Petroleum Refinery was envisioned as a solution to many of these problems. By refining crude oil locally, the refinery aims to eliminate the need for imports, reduce costs, and ensure a steady supply of petroleum products. However, the transition to a fully liberalized market has not been seamless. The dispute with DAPPMAN highlights the complexities of reforming a sector long characterized by entrenched interests and inefficiencies.
Petroleum marketers, represented by DAPPMAN, play a critical role in Nigeria’s fuel supply chain. They operate depots where fuel is stored before distribution to retail outlets across the country. Historically, marketers have relied on imported fuel, which they store in their depots and distribute through a network of tankers and retail stations. The introduction of the Dangote Refinery has disrupted this model by offering a local alternative that eliminates the need for imports. However, the additional costs associated with transporting fuel from the refinery to depots have created tensions, as marketers seek to maintain their profit margins.
DAPPMAN’s Perspective
While DAPPMAN has not issued an official response to the refinery’s allegations (based on the provided information), it is possible to infer the marketers’ perspective based on the refinery’s claims and the broader dynamics of the industry. From the marketers’ standpoint, the additional costs of coastal logistics are a legitimate expense that must be accounted for in their operations. Transporting fuel by sea to depots in Apapa and other locations involves significant logistical challenges, including freight costs, regulatory fees, and operational expenses. These costs, which amount to N75 per litre, could erode the marketers’ profitability if they are unable to pass them on to consumers.
DAPPMAN may argue that absorbing these costs would make it difficult for marketers to compete with the refinery’s gantry price, potentially forcing them to sell fuel at a loss. In a market where retail prices are influenced by competition and consumer expectations, marketers may be reluctant to increase prices, especially in the wake of public backlash against rising fuel costs following subsidy removal. As a result, DAPPMAN’s demand for a subsidy could be seen as an attempt to maintain the viability of their operations in a rapidly changing market.
However, the refinery’s accusation that DAPPMAN’s demands are a continuation of practices that defrauded the Federal Government suggests a deeper mistrust. The history of Nigeria’s fuel subsidy program is fraught with allegations of corruption, including inflated import claims and fictitious transactions. By framing DAPPMAN’s demands as an extension of these practices, Dangote Refinery is positioning itself as a defender of transparency and accountability in the petroleum sector.
Economic and Policy Implications
The dispute between Dangote Refinery and DAPPMAN has significant implications for Nigeria’s economic and energy policies. The demand for a N1.505 trillion annual subsidy is a substantial sum, equivalent to a significant portion of the federal budget. If granted, such a subsidy would undermine the government’s efforts to eliminate fuel subsidies and could place an unsustainable burden on public finances. It would also contradict the principles of a liberalized market, where prices are determined by supply and demand rather than government intervention.
Moreover, the dispute highlights the challenges of transitioning to a fully deregulated petroleum sector. While the removal of subsidies was intended to create a more efficient and competitive market, it has exposed underlying structural issues, including the reliance on coastal logistics and the inefficiencies of the existing distribution network. Addressing these challenges will require collaboration between the government, the refinery, marketers, and other stakeholders to develop a more streamlined and cost-effective supply chain.
The issue of fuel imports is another critical aspect of the dispute. Dangote Refinery’s accusation of “dumping” by marketers raises questions about the role of imports in a market with sufficient local refining capacity. The government may need to implement policies to discourage unnecessary imports, such as tariffs or incentives for sourcing fuel locally. However, such measures must be balanced against the need to ensure a stable supply of fuel and avoid disruptions in the market.
Dangote Refinery’s Broader Contributions
Beyond the immediate dispute, Dangote Refinery has emphasized its broader contributions to Nigeria’s economy. The stabilization of the Naira, for instance, is a significant achievement attributed to the refinery’s operations. By reducing the demand for foreign exchange to import petroleum products, the refinery has helped strengthen Nigeria’s currency, which has faced significant pressure in recent years. This, in turn, has positive implications for inflation, trade balances, and overall economic stability.
The refinery’s export activities further underscore its role as a driver of economic growth. The export of 3,229,881 metric tonnes of petroleum products between June and September demonstrates its ability to generate foreign exchange earnings, which are critical for a country like Nigeria that relies heavily on oil revenue. These exports also position Nigeria as a potential hub for petroleum refining in Africa, enhancing its geopolitical and economic influence on the continent.
Job creation is another area where the refinery has made a significant impact. The construction and operation of the refinery have created thousands of direct and indirect jobs, from engineering and technical roles to logistics and support services. These jobs contribute to poverty reduction and economic empowerment, aligning with the government’s broader development goals.
Government and Regulatory Role
The dispute between Dangote Refinery and DAPPMAN also raises questions about the role of government agencies in regulating the petroleum sector. The refinery’s reference to maintaining strong working relationships with government agencies suggests a collaborative approach to addressing industry challenges. However, its assertion that it will hold institutions accountable indicates a willingness to challenge regulatory failures or inefficiencies.
The Nigerian National Petroleum Company Limited (NNPCL), the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and other relevant agencies will likely play a critical role in mediating this dispute. These agencies have the responsibility to ensure a level playing field for all stakeholders while promoting the goals of deregulation and self-sufficiency. For instance, the NMDPRA could explore measures to reduce the costs of coastal logistics, such as streamlining regulatory fees or improving port infrastructure. Similarly, the NNPCL, as a major player in the petroleum sector, could facilitate dialogue between the refinery and marketers to find a mutually acceptable solution.
Legal and Public Relations Dimensions
Dangote Refinery’s statement that aggrieved parties are free to seek legal redress signals its readiness to engage in legal battles if necessary. This approach reflects the refinery’s confidence in its position and its willingness to protect its interests through formal channels. However, legal disputes could prolong the conflict and create uncertainty in the market, potentially affecting fuel supply and prices.
The public relations aspect of the dispute is equally significant. DAPPMAN’s alleged campaign of public criticism, as claimed by the refinery, suggests an attempt to sway public opinion and pressure the refinery into conceding to its demands. In response, Dangote Refinery has taken a proactive approach by issuing public statements and publishing its position in national dailies on September 15. This strategy aims to counter negative narratives and reinforce the refinery’s commitment to transparency and national development.
Path Forward: Resolving the Dispute
Resolving the dispute between Dangote Refinery and DAPPMAN will require a multi-faceted approach that addresses the immediate concerns of both parties while advancing the broader goals of Nigeria’s energy sector. Several potential solutions could be explored:
Streamlining Logistics Costs: The government and regulatory agencies could work with stakeholders to reduce the costs associated with coastal logistics. This could involve reviewing NIMASA and NPA charges, improving port efficiency, or incentivizing alternative transportation methods, such as pipelines or road tankers.
Dialogue and Mediation: The NNPCL or NMDPRA could facilitate dialogue between Dangote Refinery and DAPPMAN to negotiate a compromise. For instance, a cost-sharing arrangement could be explored, where marketers absorb a portion of the logistics costs while the refinery offers a modest discount on its gantry price.
Promoting Local Sourcing: To discourage unnecessary imports, the government could implement policies that incentivize marketers to source fuel from Dangote Refinery. This could include tax breaks, subsidies for local procurement, or penalties for importing fuel when local supply is available.
Infrastructure Development: Investing in infrastructure, such as pipelines or expanded road networks, could reduce the reliance on coastal logistics and lower transportation costs for marketers. This would require long-term planning and collaboration between the government and private sector.
Public Awareness Campaigns: Both the refinery and marketers could engage in public awareness campaigns to educate consumers about the benefits of local refining and the challenges of the transition to a deregulated market. This could help manage public expectations and reduce resistance to price adjustments.
Conclusion
The allegations by Dangote Petroleum Refinery against DAPPMAN highlight the complexities of reforming Nigeria’s petroleum sector. The demand for a N1.505 trillion annual subsidy underscores the challenges of transitioning to a market-driven system, where stakeholders must adapt to new realities without relying on government intervention. Dangote Refinery’s refusal to comply with DAPPMAN’s demands reflects its commitment to transparency, efficiency, and economic sustainability, but it also risks escalating tensions with a key stakeholder group.
As Nigeria continues its journey toward energy self-sufficiency, resolving disputes like this will require collaboration, innovation, and a shared commitment to national development. The government, regulatory agencies, the refinery, and marketers must work together to address logistical challenges, reduce costs, and ensure a stable supply of affordable petroleum products. By doing so, they can advance President Tinubu’s reform agenda, strengthen the economy, and improve the wellbeing of Nigerians.
Dangote Refinery’s operations have already made significant strides in stabilizing the Naira, boosting exports, and creating jobs. However, the success of these efforts depends on a supportive ecosystem that encourages efficiency and competition. As the refinery reaffirms its commitment to Nigeria’s progress, the resolution of this dispute will be a critical test of the country’s ability to navigate the challenges of a liberalized petroleum sector.
