Dangote Refinery Sues NNPCL, Other Petrol Importers, Seeking to Invalidate Their Import Licenses [updated]

Dangote Petroleum Refinery and Petrochemicals FZE has filed a legal suit at the Federal High Court in Abuja, seeking to invalidate import licenses granted to the Nigerian National Petroleum Corporation Limited (NNPCL), Matrix Petroleum Services Limited, A. A. Rano Limited, and four other companies.

The refinery argues that these licenses, which allow the importation of refined petroleum products, are unnecessary since Dangote Refinery is already producing sufficient quantities to meet Nigeria’s demand. Additionally, Dangote is demanding N100 billion in damages from the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) for allegedly issuing import licenses in contravention of regulations that stipulate imports should only be allowed when there is a shortfall in local supply.

The lawsuit, marked as suit number FHC/ABJ/CS/1324/2024, alleges that NMDPRA has breached Sections 317(8) and (9) of the Petroleum Industry Act (PIA) by issuing import permits for products such as Automotive Gas Oil (AGO) and Jet Fuel, which the Dangote Refinery claims to produce in quantities exceeding Nigeria’s daily consumption needs. The refinery asserts that the issuance of these licenses undermines local refining efforts and cripples its business by reducing demand for its products.

According to an affidavit from Ahmed Hashem, Dangote Refinery’s Group General Manager of Government and Strategic Relations, the facility has invested billions of dollars in refining capacity, only to face reduced patronage due to these allegedly unjustified imports.

The plaintiff’s legal team also contends that NMDPRA is neglecting its statutory duty to promote the interests of local refineries, such as Dangote’s, in favor of other entities, including major international oil companies and domestic marketers, which continue to import refined products. Furthermore, Dangote Refinery claims that NMDPRA has sought to impose financial levies on transactions within Free Zones, including a 0.5% levy on wholesales and an additional 0.5% levy for the Midstream and Downstream Gas Infrastructure Fund (MDGIF), actions which the plaintiff argues are inconsistent with Free Zone regulations.

The refinery’s legal representatives are seeking several declarations and orders from the court. Among these, Dangote is requesting an injunction to prevent NMDPRA from issuing or renewing import licenses for petroleum products to the other companies involved in the case. The refinery also wants the court to mandate the withdrawal of all import licenses issued to these companies and others for importing refined petroleum products, contending that such licenses should be exclusive to local producers when domestic capacity meets or exceeds market requirements.

In addition to demanding the withdrawal of import licenses, Dangote seeks to halt the collection of any levies by NMDPRA that apply to the Free Zone, citing the Nigerian Export Processing Zone Act (NEPZA) and the Companies Income Tax Act as grounds for the refinery’s exemption from federal and state taxes and levies. The refinery argues that the imposition of levies contravenes legislative intent and jeopardizes the Free Zone’s goals of fostering competition and attracting foreign investment.

Claims of Conspiracy and Market Manipulation

Dangote Refinery’s court filing also alludes to a “grand conspiracy” orchestrated by international oil companies, regulatory authorities, and other vested interests that allegedly aim to suppress the refinery’s potential to alleviate Nigeria’s persistent energy challenges. The refinery claims this opposition is partly driven by discontent over the emergence of a local, privately owned refinery capable of solving the country’s fuel import dependency and boosting the economy. The refinery asserts that the alleged collusion is detrimental not only to its business interests but also to Nigeria’s broader economic aspirations, as the country remains heavily reliant on fuel imports despite possessing local refining capacity.

Settlement Talks in Court

During the court session, Justice Inyang Ekwo adjourned the case until January 20, 2025, after the plaintiff’s counsel, George Ibrahim SAN, disclosed that the parties involved were exploring the possibility of settling the dispute outside court. Ibrahim indicated that discussions had commenced between Dangote Refinery and the defendants following an attempt to serve the originating summons. The next court session is expected to provide updates on whether the matter will be settled amicably or continue to litigation.

Background to The Ongoing Dispute

This lawsuit is the latest development in a series of confrontations between Dangote Refinery and regulatory authorities over Nigeria’s petroleum market dynamics. Recently, Africa’s wealthiest man, Aliko Dangote, expressed frustration with regulatory challenges and hinted at selling the refinery to the state-owned NNPCL, a move that many interpreted as a response to escalating tensions and disputes over compliance and market practices.

The refinery has previously voiced concerns about the importation of substandard fuel products by other companies, arguing that such practices undermine local refining efforts and expose consumers to quality risks. Earlier, the federal government announced that marketers are now permitted to source petroleum products directly from the Dangote Refinery, following NNPCL’s withdrawal from its intermediary role, signaling attempts to balance market interests and resolve ongoing disputes.

What This Means for Nigeria’s Energy Sector

The lawsuit highlights longstanding issues in Nigeria’s energy sector, particularly regarding the regulation and promotion of local refining capacity. While Nigeria is Africa’s largest crude oil producer, its dependence on imported refined petroleum products has persisted for decades, primarily due to inadequate local refining infrastructure.

Thus, Dangote Refinery, with its large-scale investment in refining and petrochemicals, was seen as a potential game-changer that could significantly reduce the country’s reliance on imports. However, regulatory disputes and unexpected market conflicts have posed substantial hurdles.

Energy experts believe that the case has broader implications for Nigeria’s energy policies under the Petroleum Industry Act (PIA), which was enacted to reform the sector by encouraging private investment in local refining while also ensuring fair market competition. According to them, the outcome of this legal battle could influence future decisions regarding import licensing, local content policies, and the role of private players in Nigeria’s downstream petroleum market.

However, a large section of observers believe that this lawsuit by Dangote Refinery is part of the group’s attempt to monopolize the oil sector as it has done in the many other sectors in which it operates.

Editor’s Note: This has been debunked