Like many other Nigerians, I am observing with growing concern the ongoing corporate war that is brewing between Dangote Refinery (Dangote Petroleum Refinery and Petrochemicals) versus the independent marketers and key mid and downstream sector practitioners of the oil and gas sector in Nigeria. The issue is lingering with adverse effects on the citizenry and economy of Nigeria. More so it is also now an issue of litigation as Dangote Refinery sued the NNPC, NMDPRA, and some major Oil Marketers at the Federal High Court in Abuja; seeking for stoppage of some Oil Marketers from importation of Premium Motor Spirit (PMS) into Nigeria, which Dangote refinery is seeking declaration by the Court amongst other prayers that NMDPRA is in violation of its statutory responsibilities under the PIA for not encouraging local refineries such as the company.
The Need for a change management framework for such a Paradigm shift
The emergence of Dangote Refinery in a 50-year-old mid-downstream subsector in Nigeria has catalyzed a paradigm shift and therefore calls for transformational changes that should be larger in scale and scope which MUST be a departure from the status quo.
The successful setup and operation of not just the first private refinery in Nigeria, but a $ 20 billion refinery of high capacity and one of the best in the world is no mean feat. Therefore, when you have a paradigm shift of such nature, whereby it will no longer be business as usual, there will naturally have to be teething problems, just like any kind of paradigm shift. The change management process could be tumultuous, but if managed properly, it will produce the desired outcomes. This is also bearing in mind that the PMS market is fully deregulated. However, deregulation does not mean that there will be no regulations and/ or interventions.
We should note that Dangote Refinery and the marketers are businesses that have debts to pay and profits to make. It is the responsibility of the government to make life easy for Nigerians, by providing an enabling environment, well-thought-out interventions, enforcement of regulations and extant laws, etc.
There must be a holistic approach to resolving this issue in the overall interest of Nigerians. The pains that Nigerians are currently experiencing due to the crisis are not acceptable.
Therefore, the best approach to a lasting solution for this situation is from a Change Management perspective. This is because all the stakeholders are reacting to this new change in paradigm which is a major disruption of the status quo. Accordingly, I wish to propose a Change Management framework, as follows:
I am of the strong opinion that a win-win model should be immediately facilitated by the regulator, i.e. the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). This is the best way to unlock this logjam between two strong, critical, and competing stakeholders. Allowing Dangote and the Oil Marketers to “sort out” themselves will lead to a protracted logjam that will continue to impact negatively on Nigerians. There must be an arbiter/ moderator to manage the negotiation and conflict. It is only a win-win model that will foster a good business handshake between Dangote Refinery and the Oil marketers so that PMS will be available to Nigerians at a fair pricing. This is because the imbroglio is impacting the citizenry, residents, and businesses in Nigeria. I urge all the critical stakeholders to look over and beyond personal/ business interests to look at the sustainability of the industry on the one hand, and the betterment of Nigerians and Nigeria on the other hand.
In the 2nd of August 2024 (3 months ago) episode of this Column I advocated for support for the success of the Dangote Refinery, wherein I stated, “I believe that the Dangote refinery is a project that should be guarded jealously and be supported to succeed, and where there are issues, the issues should be handled professionally and strategically“. In another paragraph of the same publication, I also stated that, “For the avoidance of doubt, I am not advocating for unfair advantage to be given to the Dangote Refinery or Dangote group………..And where Dangote comes short of expectations, then the proper processes should be followed to ensure the rule of law and protection of our commonwealth and territorial integrity, in a way and manner that we don’t chase our development partners and good investments that we desperately need at this time….”
It is also my view that Dangote Refinery also needs to be circumspect during the negotiations, at this stage of transition. I recall that Alhaji Aliko Dangote – the Chairman of Dangote Group, stated last week that for the product to remain in Dangote Refinery storage, it is costing a lot of money – and that’s true. Hence, business optimization, operational excellence, and quick turnaround are critical success factors for Dangote Refinery. Conversely, the same performance variables are also critical success factors for the Oil Marketers. So, the notion that the Dangote Refinery should solely determine key variables like pricing should not be the approach/methodology; otherwise, a bad precedent will be set, that will leave Nigerians pretty much where we are or even worse in the mid to long term. Accordingly, one party in this situation should not determine the standards or outcome of the negotiations. The outcome MUST be based on robust constructive engagements and must be based on a win-win approach. Otherwise, the template that will evolve will not be sustainable. I urge all parties to be circumspect.
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Meanwhile, I am comforted to hear that the Oil marketers for instance IPMAN (Independent Petroleum Marketers Association of Nigeria) have stated that they have written a letter to Dangote Refinery asking for a business meeting to discuss modalities for the offtake of PMS. That is a good step in trying to sort out the problem. There must be a B2B (business-to-business) conversation for us to move forward. I’m very happy that President Bola Tinubu has asked that NNPC stand down in this conversation and negotiation. However, it is important that the NMDPRA as the regulator should act as a “moderator”. But if the NMDPRA is not showing enough gravitas at this point, I respectfully request that President Tinubu, should appoint a lean team of respectable Nigerians, as “neutral arbiters” to act as “moderators/ mediators” in this very thorny issue; so that we can make progress. The lingering issue where Marketers are not importing or are unable to buy from Dangote Refinery is increasing the hardships Nigerians are facing due to the continuing scarcity of PMS.
How We Could Break the Deadlock
I am also a believer in competition. Indeed, the Dangote Refinery has triggered a big competition to the Oil Marketers. Consequently, I urge that all Nigerians continue to support the Dangote Refinery to succeed by ensuring that its products are procured. Nevertheless, there should be a safeguard within the Change management framework to ensure that Dangote Refinery does not also hold the marketers to ransom. Going forward, finding a balance is very key to sustaining the availability and fair pricing of PMS in Nigeria.
It is also worthy of note that while Dangote Refinery has the product, it currently does not own a single Filling Station in Nigeria. Therefore, Dangote Refinery needs the Oil Marketers the Oil Marketers need Dangote Refinery, and Nigerians can only access the PMS from the filling station – as far as the Nigerian market is concerned. One may argue that Dangote Refinery could as well just export all the PMS if the marketers do not/ refuse to buy at his price. In my opinion, if Dangote Refinery exports all the products, it will be violating one of the key justifications based on which it was awarded the license to refine Crude in Nigeria. Even though the Dangote Refinery is a Free Trade Zone one of the key justifications for granting the Crude Oil refining license to Dangote Refinery is that it will also supply the local market. It will also be a strategic mistake for Dangote in the mid to long term, to take a hardline position, which could likely backfire when the other private refineries become active.
Moreover, in providing safeguards in the negotiations within the Change Management Framework, a proviso should be included that if/when there are clear, cogent, and verifiable reasons that indicate that Dangote refinery is not providing what I call a “win-win” offer; then the oil marketers should be allowed to import PMS for an initial period of 3months and compete with Dangote’s product, so as “to test the competition” – so long as the imported products will be of verifiably the same quality, quantity, and less pricing. Competition is crucial to ensuring sustained PMS availability, price stability, and in the mid to long-term reduction in pricing when we have a glut (plenty supply) of petrol in the Country. However, allowing one party; either Dangote Refinery or the oil marketers to dictate or create a situation that will lead to a monopoly should be encouraged or acceptable.
In subsequent episodes, I will continue elucidating on this important topic, including the economics of short-term import (if necessary) to test the competition, some prudential guidelines to ensure product quality, and quantity, regulatory shortfalls, some prudential guidelines, etc. Thank you.
By Baba Yusuf @TheNation
