PETROAN Accuses Dangote of Attempting to Stifle Competition in Petrol Pricing

PETROAN has raised concerns that Dangote may be attempting to monopolize the petrol market, accusing the company of actions that could stifle competition. Learn more about the ongoing debate over fuel pricing in Nigeria.

The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has alleged that Dangote Refinery is attempting to undermine competition in the downstream sector.

The accusation from the marketers comes after Dangote Refinery asserted that their complaints about its petrol pricing stem from a desire to import substandard products more cheaply.

In a statement released on Sunday, the refinery revealed that it prices petrol at N990 per litre for truck sales and N960 per litre when sold into ships. The company explained that its pricing strategy aligns with international market rates.

Dangote Refinery’s disclosure came after both the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) and the Independent Petroleum Marketers Association of Nigeria (IPMAN) claimed they could purchase petrol at rates lower than those offered by Dangote.

In its response, the refinery stated that only substandard products can be imported at prices lower than its own.

According to the spokesman, Dangote Refinery is selling petrol at N960 per litre for ships and N990 per litre for trucks.

In a recent statement issued on Monday, PETROAN’s spokesperson Joseph Obele claimed that Dangote’s accusation of importing substandard products is simply “his usual tactic for maintaining monopoly.”

The marketers argued that consumers receive the greatest value for their money when competition is at its highest, so promoting competition should be encouraged.

They noted that any market lacking competition is likely to be exploitative and driven solely by the pursuit of profit.

PETROAN announced that it has finalized arrangements with its international refinery counterparts and financial partners to import the highest quality PMS, which will be sold at much lower prices than the current rates in Nigeria.

The statement says: “The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has

successfully established a Strategic Business Unit named PETROL.

PETROAN’s initiative focused on solutions and demonstrated patriotism in response to the pricing instability and challenges within the downstream sector.

The President’s reformative and transformational plans are viewed as unfavorable by advocates and beneficiaries of a monopolistic market. The President’s interventions aim to liberalize the downstream sector by creating an inclusive market for everyone involved.

Intense or aggressive competition in any market results in the best value for money when exchanging a commodity. Consumers receive the most favorable pricing during peak competition; therefore, promoting competition is beneficial.

In contrast to a competitive market, this type of market will be exploitative and focused solely on profiteering. The announcement by Dangote Refinery that PETROAN will import substandard petroleum products doesn’t surprise stakeholders, as it’s seen as his typical tactic for maintaining monopoly power.

The publication followed an announcement by PETROAN and IPMAN about their plans to sell PMS in Nigeria at a significantly lower rate than the current market price.

It is important to clarify that PETROAN has never compared Dangote’s PMS price with any other, as the price was only disclosed this morning during a press release by Dangote Refinery.

PETROAN has finalized arrangements with its foreign refinery partners and financial collaborators to import top-quality PMS, which will be sold at prices significantly lower than the current rate in Nigeria.

We intend to enter the market by December 2024, subject to approval from

Our import permit license, issued by the regulatory agency, and access to foreign exchange from the CBN at the official rate.

Prior to this, Dangote Refinery had not disclosed its selling rate for PMS.

until IPMAN and PETROAN declared their willingness to sell at a reduced rate.

The announced rate of #990 by Dangote Refinery was deemed inconsiderate, given that the refinery benefited from significant concessions for accessing foreign exchange during its construction.

The primary factor in setting a price is typically the cost of production plus a reasonable margin. However, this approach was not used by Dangote Refinery for determining PMS prices. Instead, they based their pricing on comparisons with international rates in the global market.

A nation that granted you an undisclosed concession for foreign exchange, despite facing significant criticism from financial experts, should not have based its pricing model on the international market’s selling rate. Instead, it should have been determined by considering the cost of production plus a reasonable margin.

READ ALSO: Dangote Refinery Addresses Misinformation Circulated by IPMAN, PETROAN, and Other Associations

Goods from Chinese markets are not selling for as much as those from American markets due to differences in production costs.

The claims that PETROAN plans to import substandard products, along with the assertion that an international company aims to set up a PMS blending plant in Lagos, are simply strategies employed by Dangote Refinery. These tactics appear designed to eliminate competition and establish a monopoly for exploitative purposes.

A few months ago, the CEO of Dangote Refinery mentioned that NNPC LTD was importing.

subpar petroleum products, claiming that his were far superior to those being sold by NNPC LTD to marketers. In a subsequent press conference, he stated that the refinery in Malta was merely a blending plant and not an actual refinery. These allegations aim to shut out other operators in order for him to enjoy a monopoly.

The available evidence indicated that diesel (AGO), a deregulated product, was selling for less than ₦800 in the Nigerian market just weeks before Dangote Refinery began AGO production. However, as soon as this production started at Dangote Refinery’s entrance into the AGO market, prices quickly surged above ₦1,000—contrary to expectations of it being a “salvaging refinery.”

PETROAN takes this opportunity to applaud Mr. President for his dedication to revitalizing the state-owned refineries. It is noteworthy that, unlike before, the ongoing rehabilitation project has consistently received funding under President Tinubu’s leadership.

We will continue to advocate for the privatization of the Port Harcourt and Warri Refinery plants immediately after their rehabilitation. These facilities should be handed over to a reputable firm with the necessary technical capabilities, managerial skills, and financial strength in collaboration with PETROAN and other key stakeholders.

This will empower the operators of government-owned refineries to withstand intense competitive pressure from established beneficiaries of a monopolistic market. Historically, these beneficiaries have forced numerous struggling business owners out of various sectors in favor of a single operator.

Stakeholders’ concerns are a hope that the privatization process should be…

using Indorama Petrochemicals as an example, in contrast to the Maintenance Repairs And Operations (MRO) contract approach, business scholars describe the red ocean strategy as a scenario where companies compete fiercely with one another to capture more of the current market demand.

Some business scholars contend that adopting a red ocean strategy with the intention of forcing competitors out to acquire their facilities is harmful, as it leads to a monopolistically controlled market aimed at exploiting consumers.

A balanced market should accommodate all types of players: the market leader who enjoys a dominant position, the challenger who serves a significant portion of consumers, and followers who continue to survive by offering competitive pricing.

Therefore, it is crucial for the Federal Government to discourage and dismantle any efforts toward establishing a monopoly in the downstream sector to reduce the current selling rate of PMS. Introducing competition serves as the only catalyst for lowering PMS prices, and PETROAN is committed to supporting the Federal Government in fostering strong competition within this sector.

The key resolution for the current pricing turbulence and instability in the downstream sector is for Mr. President to facilitate or appoint someone to organize a comprehensive stakeholders meeting, including DAPPMAN, MEMAN, PETROAN, IPMAN NUPENG, and PENGASSAN.

This meeting typically gathers valuable firsthand input from the industry.

stakeholders aiming to develop a conclusive strategy for PMS pricing in the downstream sector.