Aliko Dangote's Oil Monopoly: 7 Things You Should Know
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African CEOs - June 6, 2023

Aliko Dangote’s Oil Monopoly: 7 Things You Should Know

Aliko Dangote’s $19 billion oil refinery is billed to make Nigeria self-sufficient in local refining of crude oil and also increase his monopoly in Africa’s business landscape. With a 650,000 barrels daily production capacity, the refinery transforms crude oil into different usage of petroleum products such as diesel, gasoline, jet fuel and kerosene.

Dangote, who is known for his strategic investments and business ventures extends his monopoly to the oil sector. While this extension will do Nigeria well, it can potentially impact other players in the market. Let’s briefly examine some important factors you need to pay attention to.

Dangote refinery won’t reduce fuel price

The first and most important thing you need to pay attention to is the fact that the Dangote refinery won’t reduce the fuel price. This is because fuel price is determined by global demand, regulations, and other factors. 

To affirm this, the Group Chief Executive Officer, of Nigerian National Petroleum Company Limited (NNPCL) Mele Kyari in an interview said, “There is a notion that if the product is processed locally, prices will reduce. Let me make it clear that it is not going to change anything. If you produce locally, the refineries will also input the cost of production and other things and it will be sold at the current price.”

While the factors that determine the prices of petrol vary from one nation to another, the retail prices of petrol can be influenced by the refining cost and profits, distribution and marketing and taxes.

Competition among importers could reduce fuel price

While Dangote’s refinery may not reduce fuel prices the competition among importers could reduce it. When there are multiple companies competing to sell fuel, each company could be motivated to offer the lowest price possible in order to attract customers.

As competition becomes stiffer in a bid to survive Dangote’s oil monopoly, consumers could enjoy lower fuel prices. It could also encourage importers to improve their operational efficiency and optimize costs.

It will strengthen Nigeria’s export potential and make Dangote richer

No doubt Dangote’s oil refinery will strengthen Nigeria’s export potential. With its vast production capacity, the Dangote Refinery has the potential to not only meet local demand but also become a significant player in the international market. It will also help Nigeria generate foreign exchange earnings and strengthen its position as a key player in the global oil industry.

As much as this is good, Dangote who has been Africa’s richest person for 12 consecutive years, is about to get richer. His wealth could further strengthen his monopoly in the oil industry. With his wealth, he can afford to buy government-owned refineries and invest in cutting-edge technology that will distinguish him from other players in the oil market.

Dangote refinery will further advance the privatisation agenda

Dangote’s refinery is a major boost to the privatisation agenda in Nigeria. Once it begins full operation it could help pave the way for privatization projects in Nigeria. It could help convince the Nigerian public that privatisation can lead to better economic outcomes.

Also, the refinery could provide a model for other privatisation projects. By observing Dangote’s refinery other privatisation projects can avert the risk of failure.

It will deepen Dangote’s ties with the government

Dangote’s Oil refinery will not only enrich him, it will also strengthen his ties with the government of the day. Dangote who has reportedly enjoyed almost exclusive access to government-subsidized foreign exchange to the tune of hundreds of millions of dollars is set to enjoy more favours.

Reports say the administration of President Olusegun Obasanjo gave him a series of import duty waivers and subsidies as he expanded his investment in cement production, a market he currently dominates.

It could lead to further neglect of government-owned refineries

Nigeria has four state-owned refineries that are idle due to mismanagement. And as you know, Dangote Refinery is equipped with advanced technology and modern infrastructure that makes it more efficient and capable of producing high-quality petroleum products. In contrast, government-owned refineries may struggle to keep pace with technological advancements due to financial constraints and bureaucratic processes, further exacerbating the neglect.

Also, the refinery’s reputation, size, and potential for higher salaries may attract skilled professionals and experienced technicians away from government-owned refineries. This brain drain can further hamper the operational capabilities and maintenance of government-owned facilities.

Expand your finances to meet the current price

While Nigerians worry about whether Dangote’s oil refinery will increase fuel prices or not, it is important that they expand their finances to meet the current price. Rather than put our hope on Dangote’s oil refinery, it is better to review expenses, develop multiple streams of income, prioritise remote work and embrace energy-saving practices that will help us survive a fuel subsidy removal era.

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