Nigeria’s poor regulation has claimed many victims and Dangote Refineries could be next

When the Lagos state government outrightly banned motorcycles from plying some major roads in the state, some Lagosians praised the decision, citing safety reasons and reduced traffic jams without considering the Chinese-owned ride-hailing companies like Opay (Oride) and Gokada that had invested hundreds of millions of dollars into their businesses.

When the Central Bank of Nigeria banned crypto transactions of any kind, many Nigerians hailed the apex bank for going out of its way to prevent cybercrime and for encouraging young Nigerians to work harder without sparing a thought for Web-3-based companies who had just raised money from investors.

Regulatory inconsistencies have always hampered high-growth companies and disruptors in the Nigerian business market. Many Nigerians might not have paid attention but it must have hit close to home this weekend when Aliko Dangote, Africa’s richest individual expressed his frustration with the challenges his refinery is facing.

In an exclusive interview, Aliko Dangote urged the NNPC to purchase the refinery, expressed his board’s decision against investing in the steel industry, and disclosed the taunts from a close friend who warned him against investing in the country.

“Four years ago, one of my very wealthy friends began to invest his money abroad. I disagreed with him and urged him to rethink his action in the interest of his country. He blamed his action on policy inconsistencies and shenanigans of interest groups. That friend has been taunting me in the past few days, saying he warned me and that he has been proven right,” Dangote told Premium Times.

Read also: What Nigerians Stand To Gain If Dangote Refinery Is Listed On The Stock Market

A recap of the issues facing Dangote’s refinery

Dangote already established himself as a shrewd businessman whose investments in the cement, salts, and sugar industries have been largely successful. His desire to enter the oil and gas sector was met with mixed but mainly positive reactions but the challenges from regulatory bodies are now frustrating him.

The refinery, scheduled to roll out petrol to the Nigerian market in August, has been operating at just above half its capacity since starting refining operations in January. The Nigerian National Petroleum Corporation (NNPC), previously a key supplier, has delivered only 6.9 million barrels of oil to the refinery as of May, despite a supply deal and an agreement for a 20% equity participation, of which only 7.2% has been paid.

“The agreement was actually 20 per cent, which we had with NNPC, and they did not pay the balance of the money up till last year, and then we gave them another extension up till June (2024), and they said that they would remain where they have already paid which is 7.2 per cent. So NNPC, the government (sic) owns only 7.2 per cent, not 20 per cent,” Mr Dangote said, according to reports.

Last month, Devakumar Edwin, the Vice President, Oil and Gas at Dangote Industries Limited (DIL) accused International Oil Companies (IOCs) in Nigeria of doing everything to frustrate the survival of Dangote Oil Refinery and Petrochemicals by jerking up the high premium price above the market price, thereby forcing it to import crude from countries as far as the United States, with its attendant high costs.

Now, Dangote has to source crude oil from international producers primarily in Brazil and the US, and this has proved difficult because these suppliers are either demanding high premiums or claiming unavailability of the product.

What’s more?, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has claimed that the diesel produced by major refineries including Dangote’s contains such high levels of sulphur that is harmful to vehicles and the environment. A claim that Dangote has now debunked.

Navigating Nigeria’s Regulatory Maze

Operating in Nigeria’s oil and gas sector involves navigating a complex web of regulations enforced by more than 20 different regulators with overlapping functions.

The DPR, the Federal Ministry of Environment, the National Oil Spill Detection and Response Agency (NOSDRA), the Nigerian Maritime Administration and Safety Agency, (NIMASA), the Nigerian Nuclear Regulatory Authority (NNRA), Niger Delta Development Commission (NDDC), the Nigerian Electricity Regulatory Commission, Nigerian Content Development and Monitoring Board spew different regulations.

Similarly, the ministries of Health, Power, Niger Delta, Petroleum Resources, Transportation, Mines and Steel Development, Science and Technology all have different rules for operators. Perhaps the most important regulatory body in the oil and gas sector is the NNPC, governed by a board appointed by Nigeria’s president.

And that, perhaps is the bone of contention in Dangote’s throat. Over the years, conspiracy theorists have attributed Dangote’s success in the Cement and Sugar industry to his connections to the most powerful people in government.

These theorists claim that the Nigerian regulations favoured Dangote so much that he was allowed some sort of monopoly in the sectors he invested in. So the only reason he is unhappy now is that the current administration would not allow him to have his way.

For context, Farouk Ahmed, the NMDPRA Chief Executive, while speaking to the state house correspondents last Thursday, accused Mr Dangote of requesting that the regulatory suspend or stop all importation of petroleum products, especially automotive gas oil (AGO) or jet kero and direct all marketers to the refinery.

Dangote has taken the ‘monopoly’ accusation to heart. While he has denied it, it is also his primary reason for not investing in the Nigerian Steel industry going forward. “You know, about doing a new business which we announced, that is, steel. Actually, our board has decided that we shouldn’t do the steel because if we do the steel business, we will be called all sorts of names like monopoly. And then also, imports will be encouraged.”

Whatever the case may be, the federal government needs to find a middle ground and end this rift with Alhaji Dangote. Already, citizens distrust government-owned facilities because they are ill-maintained and end up costing taxpayers Nairas more than they generate profits. For context, Nigeria is Africa’s largest producer of crude oil, and the world’s 15th biggest. Yet, none of its existing government-owned refineries are operational.

Dangote’s refinery seemed like the only hope for a big increase in the availability of petrol, and a subsequent drop in prices. If he is to be believed, Dangote is not in this for the profits. He reminded reporters that he is 67 years old and cannot take the refinery to his grave but he wants to do this for the country that has experienced long queues in filling stations for decades.

“This country has been having petrol queues since 1972. So 1972 till date is 52 years, and we are still having the same issue. Just for the fact that we are ready and about to start … everybody is now up and about. Yes, but we know that what is giving us a lot of joy is that we know that the majority of the population are with us and, so we are not discouraged. We will continue what we are doing,” he added.

Imagine if he gives up on that mission.