Financial Energy Review
…….as Major Marketers Kick over Monopsony with ‘Siddon Look’ Posture…….
…….by Ben Ndubuwa….
Prof.Wunmi Iledare, a petroleum economic expert has said that the Nigerian National Petroleum Company Limited (NNPCL) being a sole buyer of Dangote Refinery Premium Motor Spirit (PMS) is setting anti-competive market structure.
Prof. Iledare explained that a monopsony is an anticompetive market structure in which there is only one buyer of a particular good or service. Meaning it has complete control over the market and can dictate the prices and terms of the transaction.
According to him, being a sole buyer of Dangotte PMS, such a mopsony market structure design is unable to achieve optimal social welfare for consumers and producers.
“In this monopsony structure, the single buyer has a significant market power, allowing it to set prices; the monopsonist can restrict output; but the monopsonist can also exert pressure on suppliers to reduce costs, improve quality, or meet defined specifications.
“What NNPCL is proposing to do with Dangotte Refinery is anti competitive. It is in no way different from when the corporation acted as a single importer and a monopoly firm participating in the PMS wholesale market with nearly an absolute barrier to entry.
“I cannot imagine the Petroleum Authority taken the fifth amendment on this issue and subjugate its downstream competitive market mandate, the ultimate PIA goal.
“Time will tell” Prof. Iledare said.
On the issue of energy security and the factor of availability verses affordability, Prof. Iledare maintained that there is no energy subsidy even in developed economy. “What you have are even taxes on petroleim products. So it is not factual” he said.
In his collaboration, the Managing Director of 11 Plc, Chief Tunji Oyebanji said that its obvious NNPCl may have had an arrangement with Dangote in supplying the feedstock of crude and as result becomes the sole off taker of the refined products.
However, he had expected that it should have been a situation of willing buyer and willing seller devoid of monopoly. Expressing concern that NNPC retail outlets will be in advantage over other marketers for they will receive products first in this arrangement and other marketers will scramble for what ever is left after NNPC retail outlets.
On energy security in relation to the availability and affordability of petroleum products he dismissed the proponents of energy subsidy adding that investors in the value chain of the sector must have return on investment.
