Matrix Petroleum Services Limited, A.A. Rano Limited, and AYM Shafa Limited have taken legal action to safeguard their import licenses in Nigeria’s oil sector. On November 5, 2024, the companies filed court documents in response to a lawsuit by Dangote Petroleum Refinery and Petrochemicals FZE.
The suit, filed at the Federal High Court in Abuja, challenges the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and calls for a review and potential revocation of the companies’ import licenses.
In their response, the three defendants urged the court to prevent NMDPRA from restricting their licenses to import refined petroleum products. Their stance centers on what they see as a potential threat to energy security and a setback to fostering competition within Nigeria’s petroleum industry.
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Their legal team, led by Senior Advocate of Nigeria (SAN) Ahmed Raji, argued that maintaining diverse sources of refined product imports would secure Nigeria’s energy needs and prevent monopolistic control over fuel supply and pricing.
“Countries worldwide ensure energy security,” said Raji. “Even nations like the United States—where oil reserves and refining capacity are far greater than Nigeria’s—still import and store petroleum products to safeguard against unforeseen circumstances and ensure steady supply.”
Raji added that diverse sourcing aligns with global practices and strengthens national resilience to supply disruptions.
Dangote’s Legal Suit and Demands
In suit number FHC/ABJ/CS/1324/2024, Dangote’s legal counsel, Ogwu James Onoja SAN, had argued that NMDPRA’s continued issuance of import licenses to companies like NNPCL, Matrix, AYM Shafa, and others violates Sections 317(8) and (9) of the Petroleum Industry Act (PIA). According to Onoja, these sections limit the issuance of import licenses solely to situations where a shortage in domestic production exists, a condition he asserts is not currently met given Dangote’s production output.
“The NMDPRA is in violation of its statutory responsibilities under the PIA,” said Onoja, “by issuing import licenses when local production is sufficient. This undermines the role of refineries like Dangote’s that have invested heavily to meet domestic demand.”
The Dangote Refinery, with a capacity to refine 650,000 barrels per day, has positioned itself as a pivotal player in Nigeria’s goal of achieving self-sufficiency in petroleum product production. Dangote’s suit includes a claim for N100 billion in damages, with Onoja arguing that the import licenses disrupt market stability and Dangote’s ability to meet Nigeria’s demand for products like Automotive Gas Oil (AGO) and Jet-A1 aviation fuel.
Accusations of Monopolistic Intent
The defendants countered Dangote’s lawsuit by asserting that it aims to establish a monopoly, where Dangote alone controls supply, distribution, and pricing across Nigeria’s petroleum industry.
“Oil, in both its crude and refined forms, is an international commodity that is traded globally,” the defendants’ affidavit states. “There are universally accepted trade practices and platforms that ensure fairness and sanctity of contracts in the industry.”
The companies argue that Dangote has veered away from these fair trade practices by instituting purchasing terms that impose financial burdens on buyers, making it difficult for them to operate independently.
Ali Ibrahim Abiodun, Acting Managing Director of AYM Shafa, deposed an affidavit on behalf of the companies, stating that despite purchasing significant volumes from Dangote, the refinery cannot consistently fulfill market demand.
“Since Dangote Refinery began refining petroleum products, AYM Shafa has been a major purchaser,” Abiodun stated, noting that AYM had acquired over 116 million liters of AGO and hundreds of metric tons of Premium Motor Spirit (PMS) from Dangote.
However, he claims that fulfilling these orders takes an average of two months, during which time “trucks wait for months to be loaded at the refinery.” In contrast, imports take roughly three weeks to reach Nigerian shores, making overseas options a viable alternative for maintaining a steady supply.
The companies also raised issues with Dangote’s pricing policies. They alleged that Dangote requires buyers to deposit 110% of the product value via Letters of Credit (LC), with the price only being disclosed after loading.
“This leaves buyers uncertain of the final cost until after delivery, often forcing them to sell at a loss and placing marketers, consumers, and Nigeria at the mercy of the plaintiff,” the affidavit asserts.
Moreover, the defendants claim that the costs associated with importing products, such as shipping, insurance, and customs fees, are still less than the wholesale prices charged by Dangote, whose products are domestically sourced and free from customs duties.
In response, Dangote has maintained that its policies and pricing reflect standard industry practices and that the terms protect its investment, given the high volatility of petroleum markets. Energy experts agree with this assertion, noting that imported petroleum products are cheaper because they’re inferior.
Background on Dangote Refinery’s Legal Claims
The Dangote Group, led by Aliko Dangote, has long championed the refinery as a strategic solution to Nigeria’s dependence on imported petroleum products. However, in an official statement dated October 21, 2024, the group described the lawsuit as an “old issue” that had since evolved into constructive discussions.
“This is an old issue that began in June and culminated in a matter being filed on September 6, 2024,” read the statement from the group’s communications officer, Anthony Chiejina. “Currently, the parties are in discussion following President Bola Tinubu’s directive on Crude Oil and Refined Products Sales in Naira, which was approved by the Federal Executive Council (FEC). We have made significant progress, and events have since overtaken this development.”
He emphasized that no court orders had been issued or served and that no adverse consequences would be felt by any parties involved, as they expected to withdraw the suit by January 2025.
The statement further highlighted that Dangote Refinery’s production output, exceeding 650,000 barrels per day, was intended to meet national demand without relying on imports, barring exceptional circumstances.
The matter is slated for a status report hearing on January 20, 2025, in Abuja. The outcome of this case could significantly shape the policies governing Nigeria’s oil importation market, impacting both local and international players.
The NMDPRA’s role as a regulatory authority is central to the arguments of both parties, with Dangote arguing that it must prioritize domestic refineries under the PIA. The defendants counter that energy security requires diversified supply lines, especially when local production falls short of demand, citing the efficiency of imports to maintain product availability.