Aliko Dangote’s $20 billion oil refinery, hailed as a potential “game-changer” for Nigeria, is now at the center of a dispute between the billionaire industrialist and government regulators.
A Refinery Meant to Break Import Dependency
Conceived a decade ago and completed last year amidst delays and cost overruns, the refinery was designed to liberate Nigeria from its reliance on imported refined petroleum products.
Despite being Africa’s largest oil producer, Nigeria lacks sufficient domestic refining capacity and spends billions of dollars annually importing finished products.
Early Challenges and Accusations of Monopoly
However, the refinery’s operation has not been smooth. It currently produces diesel, aviation fuel, and naphtha but has struggled to secure enough crude oil to ramp up production. This has forced it to source supplies from as far afield as Brazil and the US.
Tensions between Dangote and the administration of President Bola Tinubu have been further aggravated by accusations of monopolization from Farouk Ahmed, head of the Nigerian Midstream and Downstream Regulatory Authority (NMDPRA).
Ahmed claims Dangote sought to block imports of diesel and aviation fuel to gain a competitive advantage and alleges that the refinery’s diesel is “inferior.” Dangote vehemently denies these allegations and maintains his product is of the highest quality.
Disputes with NNPC and Allegations of Monopolistic Practices
The controversy extends to Nigeria’s state-owned oil company, NNPC, which previously held a 20% stake in the refinery.
NNPC’s share was recently reduced to 7.2% after Dangote claimed the company failed to pay its outstanding balance, primarily in crude oil supplies.
NNPC disputes this, stating it capped its equity as part of a portfolio reassessment.
Dangote has faced similar accusations of monopolistic practices in the cement industry, where he commands over 60% of the Nigerian market. Critics allege price manipulation and preferential treatment from past governments, claims Dangote has denied.
Concerns Over Regulatory Statements and “Mafia” Influence
Dangote Group’s chief strategy officer, Aliyu Suleiman, expressed concerns over the regulator’s accusations, fearing they could be interpreted as a government stance.
He stressed, however, that Dangote Group maintains a “very good relationship with the government on many facets.”
Dangote himself has alluded to an oil “mafia” seeking to sabotage the refinery to protect their own import-based profits.
A senior politician within the ruling party echoed this sentiment, describing a “cabal” benefiting from the current import system.
The Future of the Refinery and Nigeria’s Energy Landscape
Despite the controversy, a presidential spokesperson recently announced that Tinubu has instructed NNPC to sell crude oil to Dangote in local currency, though the details remain unclear.
The refinery’s future remains uncertain, with Dangote’s camp and other Nigerian billionaires warning of forces working against it.
Suleiman asserts that there is a “concerted effort” to undermine the refinery due to the disruption it poses to the existing value chain of fuel importation. The outcome of this dispute could significantly impact Nigeria’s energy landscape and its quest for energy independence.