The Centre for Oil Sector Accountability and Reform (COSAR) has dismissed claims by the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) that Dangote Refinery’s business model poses a threat to competition and employment in the downstream petroleum sector.
In a detailed statement issued on Monday by Dr Raymond Osaremen Okojie, president of COSAR, the group said PETROAN’s criticisms of the refinery’s adoption of a forward integration strategy and its planned use of a private sector equalization system reflect a fundamental misunderstanding of free-market economics.
“The recent statement credited to PETROAN on the impact of the introduction of a private equalization fund betrays the very ethos of running a free market,” Dr Okojie said.
“What Dangote is offering is a private sector equivalent of the petroleum equalization fund that was established in 1975 by General Yakubu Gowon, amended in 1989 by General IBB, and modified into bridging allowances in 2021.”
He explained that the refinery’s pricing model will foster uniformity in fuel pricing across the country, enabling better inflation tracking and more accurate determination of fuel consumption.
“This equalization fund will not only create a uniform pricing regime for PMS across Nigeria, which will help the NBS model the CPI basket for inflation for the share contributed by the energy basket, it will help the government find a forward curve for the actual daily consumption numbers that the government has struggled with discovering for over 40 years,” he said.
Okojie dismissed claims that Dangote Refinery would drive modular refineries out of business, insisting that no competition currently exists between them in the production of Premium Motor Spirit (PMS).
“The Dangote Refinery is not in competition with modular refineries because modular refineries do not produce PMS. As we speak, none of the modular refineries are able to produce PMS because they lack a catalytic converter or a catalytic reforming unit to process higher distillates like PMS,” he said.
On the question of job displacement, the group countered PETROAN’s assertions, arguing that the refinery will create more employment opportunities than it threatens.
“Dangote is going to employ 4,000 truck drivers and mechanics, and deploy mother stations for compressed natural gas under the government’s gas-to-transport initiative for engines with displacement of more than 2,000 CC,” Okojie said.
“Those 4,000 jobs and all the supporting redundancies will not only create employment, it will also reduce the carbon footprints that are emitted from carbon monoxide gases when fossil fuel trucks are fired for transportation.”
He added that the model presents unique advantages for filling station operators.
“This is to the benefit of station owners, because not only do they get lifted of the burden of assuming haulage risks and costs from Dangote delivering to them Cost, Insurance and Freight (CIF), they also have a financing window from the refiner. There’s nowhere in the world where a refiner offers downstream station owners credit facility to take products,” he declared.
Okojie accused elements in the current supply chain of resisting change in order to protect vested interests that have long exploited inefficiencies in the downstream petroleum sector.
“The lobby complaining are people not interested in serving the needs of Nigerians, but layering systems cost from landing to distribution,” he said.
“For decades, we have seen cartels emerge from offshore blending plants, to shipping tanker owners, to depot owners, to truck drivers, that have fixed the price of white transportation fuels, delivered sub-par standard products for Nigerians, violated the provisions of the PIA, falsified landing numbers to justify the lifting of the crude oil feedstock used for swaps, and falsified the daily consumption numbers.”
He maintained that the emergence of a well-capitalised local refiner signals the end of an era of arbitrage, unaccountable supply practices, and fuel subsidies built on opaque numbers.
“The marketers have a choice to either fall in line with the evolution of the markets or form a consortium and contribute their offshore savings towards building their own refinery to compete. The era of swaps, arbitrage, layering of systems costs is gone — welcome to capitalism.”
Dangote Refinery, Africa’s largest, has a refining capacity of 650,000 barrels per day and is expected to supply Nigeria’s domestic fuel needs while exporting excess products.
Its direct delivery model and investment in gas-powered logistics infrastructure mark a shift toward vertically integrated fuel supply chains.
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