Downstream Petroleum Sector Faces Monopoly Risk, As Marketers’ Investments Shrink
. Red Flag For Regulators NMDRPA, FCCPC
By Frederick Wright
Current scenario playing out in the nation’s petroleum sector is apparently pointing to a future of monopolistic environments where price control will be in the hands of a single entity and several petroleum marketers would be phased out of business, except with active monitoring by the regulatory agencies.
Already, several oil marketing firms have lamented threat to their business survival due to the uncertainties surrounding the pricing mechanism and distribution of products in the country.
With the commencement of operations by Dangote refinery and the Port Harcourt refinery, Nigerians would have expected relief from their aged-long suffering over petroleum products, but the recent scenario playing out in terms of pricing, distribution of products and importation brouhaha left much to be desired.
As the petroleum piliticking lingers over who controls the market, the consumers are at the receiving end, waiting for the necessary agencies of government to step-in and protect their interests.
Recently, the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) said the fluctuating petrol prices in the last few weeks are constituting threats to the survival of their businesses.
President, PETROAN, Billy Gilly-Harris, said: “The challenge we have is that we buy products at a price today, and before the close of business, the price has reduced. We thought there should be a mechanism by which prices are analysed and ensure it doesn’t impact negatively on the industry.”
Harry said: “We have been at the forefront of always implementing what stakeholders agree. We have the capacity to import our products. We also have the capacity to buy locally refined products. But we see that prices consistently shift up or down, and there is no clear business consultation on how this should be done. That is why we said the NMDPRA and the consumer protection agency should swing into action and be able to work together with other stakeholders so that we can be able to have a stable market and a stable price.”
This indicates that the operators also required the regulators’ protection for them to continue to stay in business, however, little is heard from the agencies that are saddled with the responsibility of regulating the sector and caution against excesses.
The petroleum industry law, Section 8(1)(d) stipulated that the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) shall ensure “fair pricing and competition in the midstream and downstream petroleum operations”, while Section 120-127 of the FCCPC Act 2018 empowers “Federal Competition and Consumer Protection Commission (FCCPC) to monitor and investigate anti-competitive conduct across sectors”.
These agencies are expected to wake up at this critical moment to efficiently regulate the industry and ensure that the consumers enjoy the unfolding midstream and downstream regime by gaining access to quality fuel and cheaper prices.
However, experts believed that a regime with monopolistic tendencies will do more harm to the populace than a fair, transparent and open market.
The NMDPRA and FCCPC have been urged to implement their policies to encourage competition, and ensure fair and transparent operating conditions.
The petroleum industry experts in a chart with Slye News averred that setting of price by a single player is dangerous for the market and therefore puts the consumers at the mercy of such monopolistic operators.
They enjoined the government to allow marketers, who are interested, to continue importation of fuel in order to checkmate the domestic prices which is currently being set by an entity. The competitive pricing regime, if allowed to prevail, would be to consumers’ benefit.
A petroleum sector expert and legal luminary, Taiwo Ogunleye, said the government should ensure a competitive market where multiple market players can freely enter, compete and operate under fair and transparent conditions.
He sought for effective regulatory enforcement that ensures a level playing field where consumers’ interests are protected by avoiding unfair market dominance.
According to him, the government should “avoid price fixing, predatory pricing, discriminatory tariff practices, market allocation, monopolisation or abuse of dominance, exclusive contracts, unfair restriction in distribution and retail operation, refusals to supply or deal, discrimination in pricing, or limiting infrastructure access to competitors”.
He said these behaviours distort market conditions, create artificial barriers for new entrants or small players, undermining transparency in the pricing process, harming consumers welfare and hindering innovation and improvement in service quality.
Senior Partner at The Commercial and Energy Law Practice (CANDELP) and Founder 1worq, Israel Aye, said: “if you don’t have a market that promotes fair competition, the consumers will suffer”.
Speaking on the topic: “Fueling fairness: Unlocking the power of competition in Nigeria’s downstream sector”, Aye argued that the slow pace of development in the nation’s power sector was because there was no competition for a very long time. “So, it is bad for the economy not to have competition in the power sector”, he stated.
He stated that competition will bring low prices for consumers, higher quality products, improved services, products innovation and transparency as well as incentivises modular refineries and new entrants.
According to him, the government should reinforce regulatory responsibility to uphold competitive markets, enforces non-discriminatory infrastructure access and enabling level playing field.
He therefore urged the government to strengthen the institutional autonomy and
accountability frameworks.
Recall that Dangote Refinery has instituted a legal suit against NMDPRA, NNPC Ltd, Matrix, A.A. Rano among others to challenge the PMS import licenses in Suit No. FHC/ABJ/CS/1324/2024.
Dangote faults import licenses issued despite its capacity to meet local PMS demand. It cites PIA Sections 317(8) & (9): where import is allowed only if there’s shortfall
The company seeks cancellation of licenses and ₦100bn damages for economic loss.
However, the FCCPC moved to join the suit, but Justice Inyang Ekwo of the Federal High Court, Abuja, dismissed the FCCPC request and ruled against NNPC’s preliminary objection, which challenged the suit’s competence and Dangote Refinery’s legal standing.
The concerned experts expressed concerns on why the FCCPC failed to appeal the judgement that disallowed them from joining the litigation, as this would enable them to protect the interest of the consumers in the impending verdict.
