The Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has explained to a Federal High Court in Abuja the reasons behind its issuance of oil import licences to oil marketing companies in the country.
NMDPRA presented its case to Justice Inyang Ekwo in a counter affidavit, filed and sworn to by Idris Musa, a Senior Regulatory Officer in the agency, in response to a suit filed by Dangote Petroleum Refinery and Petrochemicals FZE.
In the application, dated and filed on 13th December 2024, the regulatory authority stated that the current production of Dangote Refinery, the claimant in the suit, has not yet met the national daily petroleum product sufficiency requirements.
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“Therefore, in compliance with Section 317(9) of the Petroleum Industry Act (PIA), the first defendant (NMDPRA) issued licences to import petroleum products to bridge the product shortfall, to companies with proven track records in international product trading,” said Musa.
Dangote Refinery had sued NMDPRA and the Nigerian National Petroleum Corporation Limited (NNPCL) as the first and second defendants.
Also joined as the third to seventh defendants, in the originating summons marked FHC/ABJ/CS/1324/2024, and dated 6th September 2024, are AYM Shafa Limited, A. A. Rano Limited, T. Time Petroleum Limited, 2015 Petroleum Limited, and Matrix Petroleum Services Limited.
The claimant, through its lawyer, Ogwu Onoja SAN, is seeking to have the import licences issued by NMDPRA to NNPCL and the five other companies for importing refined petroleum products declared invalid.
The company also seeks a declaration from the court that NMDPRA violated Sections 317(8) and (9) of the Petroleum Industry Act (PIA) by issuing the import licences, which should only be granted in circumstances where there is a petroleum product shortfall.
Additionally, Dangote Petroleum Refinery is seeking damages of N100 billion against NMDPRA for allegedly continuing to issue import licences to NNPCL and the five other companies for importing petroleum products, along with other reliefs.
However, NMDPRA, through its officer, has urged the court to dismiss the suit, arguing it is misconceived, unmeritorious, and incompetent.
Musa contended that Dangote Refinery is not entitled to any of the reliefs sought.
He explained that one of NMDPRA’s key functions is to ensure a vibrant petroleum sector that operates in line with international best practices, and to ensure national energy security through continuity of supply, preventing abuse of the market by any individual or group.
He added that NMDPRA also aims to avoid unhealthy monopolies, which could allow a single company or entity to control the supply chain and determine the fate of over 200 million Nigerians.
Musa further explained that in pursuit of these objectives, the regulatory agency had supported and would continue to support local refineries to ensure their optimal capacity utilisation while maintaining national energy security.
As of 18th July 2024, four functional licensed modular refineries were operational.
“There are also four other refineries owned by the Nigerian National Petroleum Corporation Limited (NNPCL), which are at various stages of maintenance. In the second quarter of 2024, the plaintiff and the four functional licensed modular refineries produced Automotive Gas Oil (AGO) and Aviation Turbine Kerosene (ATK) in considerable volumes,” Musa stated.
Musa further noted that NMDPRA was closely monitoring developments to assess when the locally refined output would meet the country’s daily petroleum product sufficiency.
Moreover, the agency is mandated to promote competition and prevent abuse of dominant market positions and unhealthy monopolies in the oil and gas sector.
“The volume of imports to be allocated among licensed importers by the first defendant is based on specific criteria, taking into account the refining output in the preceding quarter, share of active wholesale customers, competitive pricing, and prudent supply, storage, and distribution track records,” Musa explained.
He highlighted that there were significant uncertainties regarding the Dangote Refinery’s ability to solely meet the petroleum product supply needs of the entire Nigerian population, both in the short and long term.
He added that Dangote’s alleged production capacity, particularly in terms of AGO and Jet Oil (Jet A-1), was speculative and not substantiated by scientific evidence. As such, NMDPRA, as a regulator, could not rely on such data to grant Dangote exclusive control over the market.
Musa explained that, given the current state of affairs, it would be premature and imprudent to suspend the importation of petroleum products for other entities and allow Dangote to take sole control of supply.
He warned that the present market structure of local refining could lead to a monopoly, which would have negative implications for pricing and energy security, which is best ensured through multiple supply sources.
“The first defendant remains optimistic that the operationalisation of NNPCL’s four refineries, along with increased output from the four modular refineries, will improve competition in local refining, reducing concerns about monopoly, energy security, and pricing,” he stated.
Musa also defended the 0.5 per cent levy imposed by NMDPRA, asserting it is justified by Sections 47(2)(c) and 52(7) of the PIA, to be paid by wholesale customers rather than producers, as is well known to the plaintiff.
“The plaintiff (Dangote) cannot claim exemption from local laws due to its status in a free zone while seeking to benefit from the same laws,” Musa argued.
He explained that Dangote Refinery is required to keep records of sales and remit the statutory levies within 21 days following the month of sale.
Musa stated that the first defendant was compelled to issue a letter on 10th June 2024, after Dangote failed to communicate its sales record and remit the statutory levies.
He also clarified that the Dangote Industries Free Zone Regulation 2020 was not designed to exempt Dangote from paying local levies, taxes, and rates.
“It is incorrect to suggest that the refined products from the refinery are solely for sale to Nigerians,” Musa added, noting that the plaintiff has indicated that products could be sold globally where there is demand.
Musa rejected the claim that Dangote Refinery’s local production of petroleum products obviates the need for import licences to other entities, emphasising that the refinery does not yet have the capacity to meet the entire domestic demand for refined products.
“To ensure availability of products to meet market demand, it is the responsibility of the first defendant to issue licences to qualified entities to address any shortfall and ensure domestic supply,” he stated.
Musa concluded by reiterating that NMDPRA granted licences to the second to seventh defendants based on their proven track records in international crude oil and petroleum product trading, in accordance with Section 317(8) and (9) of the PIA 2021.
He denied the allegation that NMDPRA was involved in a “grand conspiracy” against the refinery, describing it as unfounded and lacking any supporting evidence.
NNPCL, in its preliminary objection filed on 15th November 2024, urged the court to strike out the case for incompetence.
In their joint counter affidavit, filed on 5th November 2024, oil marketers warned that granting Dangote’s application would spell disaster for the country’s oil sector, and that the plan to monopolise the sector would be disastrous.
The three marketers—AYM Shafa Limited, A. A. Rano Limited, and Matrix Petroleum Services Limited—argued that the plaintiff had not produced sufficient petroleum products to meet Nigeria’s daily consumption needs.
Justice Ekwo has set 20th January 2025 as the date for a report on settlement or service.