Is Dangote Refinery a Monopoly?--Femi Obembe is a Professor of Economics and a Public Policy Analyst

 

In recent weeks, a protracted dispute has emerged between the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) and Dangote Refinery. At the heart of the confrontation are the terms proposed by marketers seeking to become major distributors of Dangote’s petroleum products through their depots. Dangote has rejected this model, arguing that it is cost-inefficient and would raise the landing price of petroleum products for consumers.

 Marketers claim their proposal serves the public interest, asserting that Dangote cannot singlehandedly supply the entire country. They argue that allowing Dangote to distribute directly to consumers amounts to monopolistic behavior. But does this claim hold water? Let’s examine the facts.

 1. Control of Input Supply

A firm may be considered a monopolist if it controls the primary source of input for an industry, thereby restricting others from participating. However, Dangote does not control oil prospecting or mining in Nigeria. This means any firm can enter the downstream sector without fear of restricted access to crude oil. On this basis, Dangote cannot be classified as a monopolist.

2. Predatory Pricing

Another hallmark of monopolistic behavior is predatory pricing—where a firm sets prices so low that competitors cannot break even. It has been alleged that Dangote reduces prices whenever marketers attempt to import fuel, making such imports unprofitable. While this may resemble predatory pricing, in the Nigerian context, it arguably serves the national interest. Given Nigeria’s abundant crude oil resources, importing refined products is economically and strategically questionable. Dangote’s pricing, if it discourages imports, could be seen as protective rather than predatory.

 3. Anti-Competitive Integration

Monopolies can also arise through vertical or horizontal integration that limits competition. Dangote has not merged with any other player in the sector, nor are there indications of such plans. Therefore, accusations of anti-competitive consolidation lack merit.

 4. Exercise of Market Power

Perhaps the most telling sign of monopolistic behavior is the exercise of market power—where a firm sets prices significantly above marginal cost. To date, marketers have not provided data to show that Dangote is engaging in such practices. Even if such data were presented, regulating monopolies is the responsibility of the government, not private marketers.

 While it is true that Nigerians should not be paying international prices for locally refined fuel, the solution lies in policy, not in forcing inefficient distribution models. Since Dangote has invested in his own distribution fleet, the government can more easily implement consumer-focused subsidies—either by offering discounted crude or preferential tax treatment—to promote affordability and welfare.

Final Thoughts

Rather than lobbying for access to Dangote’s supply chain, DAPPMAN and its affiliates should consider investing in their own refineries. The era of fraudulent subsidies is over, and the future of Nigeria’s petroleum sector lies in transparent, competitive, and efficiency