14 hours ago
2
For the last 60-plus years, the Nigerian government has maintained exclusive regulatory oversight over the sector, determining pricing for refined petroleum products in line with global market indices, issuing licences to importers and monitoring distribution and consumption.
To achieve this, the government introduced petroleum subsidies that covered a percentage of import costs to stimulate the economy. These subsidies grew to about N4 trillion annually, haemorrhaging valuable resources that could have been directed to other priorities.
There had been multiple attempts to roll back the subsidies, each one met with severe backlash. Few can forget the subsidy removal of January 2012 and the nationwide protests that followed. But each attempt allowed for extensive conversation about the long-term consequences of subsidies and importation and the need to find viable, sustainable alternatives. These failed attempts at deregulation, combined with the decline of the country’s public refineries, created space for a conversation about allowing private interests to enter the downstream refining sector.
The costs were prohibitive, as the Dangote Group’s $20 billion refinery proved. It took the intervention of the world’s richest African to take on this gargantuan challenge with support from the Nigerian government. The government was incentivised to support because it was no longer economically viable for the country to continue spending exorbitant sums on fuel subsidies. The market had to be deregulated. As such, they were much more lenient with Dangote than they would have been if the economy were not already in such dire straits.
A year into its operations, some can argue that the benefit of having the continent’s largest refinery by capacity is already yielding results. The naira has stabilised because local production has significantly reduced the demand for dollars for importation, and fuel queues have eased. The refinery has also attracted foreign direct investment, turning Nigeria into a net exporter of crude oil. But these benefits are temporary and will only be sustained if the Dangote Refinery is not allowed to establish a monopoly on the oil and gas sector.
Monopolising the Commonwealth
Over the last year, Nigerians have had to contend with the real possibility that their access to refined petroleum products, an essential staple in most households, could be determined by a monopoly. Monopoly has become a buzzword thrown about with nary a thought for context or relevance in entrepreneurial circles. But in this case, the facts suggest that Nigerians’ anxieties are not unfounded.
Monopolies are rarely accidents of the market; they are often creations of policy and strategy, and a lack of government oversight. Developed countries like the United States and the European Union have agencies tasked with regulating the growth and expansion of businesses and ensuring that no single business becomes too powerful or integral to a sector that it can artificially control the flow of resources.
Monopolies rarely exist in markets with stiff competition or where the government prioritises and invests in innovation. In 2025, only N3.2 trillion (7%) of the national budget was allocated to education, and the sector’s underfunding has led to minimal innovation and the underdevelopment of technical skills. Instead of investments in research and innovation, resources are directed towards rent-seeking practices such as lobbying the government for special privileges, tariffs, tax waivers, import bans, and exclusive licenses.
The Dangote Group has benefited from several government import bans that have weakened potential competition and innovation in the sector, allowing it to succeed without any significant innovations. The group’s dominance in the cement industry, for instance, was further strengthened by government-backed import bans first introduced by former President Olusegun Obasanjo and later by President Muhammadu Buhari, stifling other players in the market. It is a classic case of policy-driven rent-seeking that has allowed Dangote Cement to raise cement prices in response to inflation without offering any corresponding incentives to convince buyers to choose it over cheaper alternatives.
With petroleum, a more entrenched industry with dozens of influential players, the Dangote Group has already tried to force the government to revoke import licences assigned to new entrants into the market, arguing that it already produces refined petroleum products and importation will harm its investments. Its suit was rightfully dismissed after the FCCPC was added as a defendant; they have resorted to a ‘Benevolence Trap’ to force other players out of business.
Since its entry into the market, Dangote has significantly reduced petroleum prices, even shouldering the losses from these steep drops. While the end consumer enjoys these temporary benefits, importers who base their purchases on crude pricing cannot shoulder these costs and are forced to liquidate their businesses. As of April 2025, 80% of existing depots had closed down. With the Dangote Refinery expanding its Benevolence Trap to include the allied logistics industry that serves the downstream sector, it is only a matter of time before the company holds a monopoly over the entire value chain and can begin extracting profits by burdening consumers with exorbitant pricing.
Energy is essential to development, especially in a country like Nigeria, where electricity is erratic and households and businesses are forced to generate their own power. Given how much oil wealth has distorted Nigeria’s economy, allowing any conglomerate to control access to this resource will lead to a “Conglomerate Curse,” in which the Dangote Group dominates multiple strategic sectors (Cement, Sugar, Flour, Fuel) without investing in research and development or fostering healthy competition.
The consequences if and when oil prices fall will be disastrous for the economy and for the average Nigerian.
Pius Adeniji, an entrepreneur and academic, writes from Lagos.
