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OPINION : Dangote Routs the Nigerian Downstream

By
Kayode Thomas

As the noise about the Host community provisions of the PIB, currently under consideration before the National Assembly continues to rise in decibels, not much attention is being paid to other important provisions and issues in the bill.

While stakeholders are busy discussing provisions of the bill that favor or do not favor them, no one is discussing the specific provisions that impact the petroleum consuming public. The insertion of section 317(8) into the senate bill is one such provision that will ultimately hurt the consuming public.

The inserted section 317(8) in the senate bill seeks to ostensibly replicate the local industry protection policy of the government in the cement and sugar industry by limiting importation of petroleum products (PMS, Diesel, LPG, Aviation fuel, Base oil etc) to only companies that have local refining capacity. Note that most of these products are already price deregulated and are presently being imported by a multitude of downstream operators. We are all familiar with how these policy stands have tended to eliminate competition and allow companies that enjoy these protections to fix prices arbitrarily. For instance, a survey of cement prices across Africa will show that Nigerians pay the most per bag of cement. This is not desirable for the downstream.

While such policies may be desirable for pioneer or nascent industries, applying it an already existing downstream industry with many players would not only destroy the existing business but hurt the consuming public. There is no question that jobs and tax revenues will be lost if this makes it into law.

It will create a duopoly in a price deregulated price environment thereby destroying the Nigerian downstream industry as we know it today. It limits importation of all petroleum products, including PMS, diesel, aviation fuel, LPG, lubricants, base oil – products which are already deregulated, to only players with local refining capacity. In the near term, only NNPC and Dangote will meet these conditions and therefore will be the only importers. This takes the industry back and could not have been the intention of the bill.

We should not replace a state-owned monopoly in a price regulated market to a private monopoly in a price deregulated market. This exposes Nigerians to exploitation and further hardship and cannot be the intent of the reforms in the sector.

Industry sources interviewed for this report were emphatic that this clause needs to be expunged from the PIB. They insist that this provision runs counter to the spirit of market liberalization and openness that the bill espouses and should be deleted. The pointed out only an open, transparent and fully liberalized market with strong regulation will deliver the best outcomes for Nigerians and Nigeria.

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