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PETROAN Accuses Dangote Refinery of Price Manipulation and Anti-Competitive Practices

Published by Tope Fakinlede on November 5th, 2024.

PETROAN Accuses Dangote Refinery of Price Manipulation and Anti-Competitive Practices

The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has raised concerns about what it describes as attempts by Dangote Petroleum Refinery to suppress competition in Nigeria’s downstream oil sector.

This accusation follows statements made on November 1 by the Independent Petroleum Marketers Association of Nigeria (IPMAN), which claimed that petrol supplied by Dangote’s refinery is more expensive than that sourced from other depots. Yakubu Suleiman, IPMAN’s national assistant secretary, explained that many of their members prefer to purchase petrol from alternative depots due to the higher logistical costs involved in acquiring fuel from Dangote’s refinery.

In response, Dangote Refinery defended its pricing structure, stating that its ex-depot prices are N990 per litre for truck deliveries and N960 per litre for shipments. The refinery emphasized that these prices are aligned with international market rates and the prices set by the Nigerian National Petroleum Company (NNPC) Limited for local marketers.

However, Dangote Refinery also made a controversial claim that any marketer selling petrol below its prices is likely distributing substandard products. This accusation has sparked a strong response from PETROAN, which issued a statement on November 4, rejecting the notion that their products could be inferior. PETROAN’s spokesperson, Joseph Obele, called Dangote’s statement a “monopolistic tactic” aimed at undermining competition in the market.

PETROAN further argued that consumers benefit most from competitive pricing and that the government should foster an environment where multiple players can thrive. The association revealed that it is in advanced talks with international refinery partners and financial backers to import high-quality Premium Motor Spirit (PMS) and sell it at a price lower than the current market rates in Nigeria. PETROAN expressed its intention to enter the market by December 2024, pending the approval of import permits and access to foreign exchange at the official rate.

The association also criticized Dangote Refinery for withholding its PMS pricing until other market players, like IPMAN and PETROAN, expressed plans to offer cheaper alternatives. They accused the refinery of taking advantage of concessional foreign exchange rates granted during the refinery’s construction to set unreasonably high prices for its products.

According to PETROAN, the key factor in setting the price of PMS should be the cost of production plus a reasonable margin. They argued that Dangote’s pricing strategy, based on international benchmarks, is flawed, especially since the country provided Dangote Refinery with undisclosed foreign exchange concessions during construction. PETROAN noted that goods from different international markets are priced differently due to variations in production costs, which should be the basis for pricing in Nigeria rather than global market rates.

The association also took issue with Dangote’s repeated allegations against other market players, including claims that NNPC Ltd was importing inferior products. PETROAN suggested that Dangote’s public statements are part of a broader strategy to edge out competition and secure a monopoly on fuel distribution in Nigeria. They pointed to the sharp price increases in the diesel market following Dangote’s entry, despite the company’s claims to be offering more competitive pricing.

PETROAN concluded that Dangote Refinery’s actions appear designed to exclude other operators, thereby monopolizing the sector for its own benefit.