The recent lawsuit filed by the Dangote Petroleum Refinery against the Nigerian National Petroleum Company Limited (NNPCL), Matrix Petroleum Services Limited, AA Rano Limited, and others has reignited debates about the provisions of the Petroleum Industry Act (PIA) and its implications for market competition in the Nigerian oil and gas industry. Central to this case is the Dangote Refinery’s demand for the annulment of import licenses granted to these entities, along with ₦100 billion in damages from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
The PIA and Its Implications for the Refinery
In its legal argument, Dangote Refinery contends that the NMDPRA violated sections 317(8) and (9) of the PIA by continuing to issue import licenses for refined products like diesel and jet fuel, despite the refinery’s claims of domestic sufficiency. The PIA stipulates that import licenses should only be issued when there is a demonstrated shortfall in local production—a condition Dangote argues is absent due to its production capacity.
Key provisions of the PIA that influence this case include:
Fiscal Incentives: The PIA provides tax incentives to encourage investment in the petroleum sector, benefiting Dangote’s operations. The refinery asserts that the importation of products it already produces undermines its ability to compete, despite its significant investments.
Regulatory Framework: The PIA established a regulatory framework intended to promote clarity and stability. Dangote argues that by unlawfully issuing import licenses, the NMDPRA is disrupting this framework.
Local Content and Market Liberalisation: While the PIA encourages local content and competition, Dangote’s lawsuit raises the question of whether continued imports undermine the intention to prioritise domestic production.
The Refinery’s Strategic Position
Dangote’s lawsuit hinges on the notion that the market is being oversaturated with imported products, thus diminishing the demand for its refined petroleum. In addition, the refinery alleges that NMDPRA’s imposition of a 0.5% levy on its wholesale transactions contravenes statutory provisions related to free-zone operations. This, according to Dangote, violates the act’s purpose of fostering competition and foreign investment through free zones.
The PIA’s Support for Dangote’s Position
Although the PIA promotes market liberalisation, it does not explicitly support a monopoly. Dangote’s legal team has sought to prevent NMDPRA from issuing or renewing import licenses to its competitors, arguing that these licenses are contrary to sections of the PIA aimed at regulating supply based on need. However, the PIA also protects market competition, making it unclear whether Dangote’s request for import license annulments aligns with the broader objectives of the Act.
The case, presided over by Justice Inyang Ekwo, has been adjourned to January 20, 2025, for further negotiations between the parties. The outcome will likely hinge on the court’s interpretation of the PIA’s balance between promoting domestic refining capacity and ensuring a competitive marketplace.
