Dashed Hope: Dangote Refinery offers no Solution to Persistent Fuel Price Hike
There seems to be no permanent solution to the astronomical and continuous hike in petrol price, within the framework of the neocolonial, neoliberal capitalist economic arrangement currently being superintended over by the Tinubu government. Petrol price had risen sharply from about N198 in late 2022 to about N1,150 naira currently (500 percent increase), thanks to the implementation of naked market policies through removal of subsidy on petrol. This has led to spiraling inflation that continues to defy the force of gravity.
By Kola Ibrahim
Given the excruciating hardship and suffering the sharp increase in petrol price has caused Nigerians, not a few Nigerians believed that the birthing of private refinery by Africa’s richest man, Aliko Dangote, will bring some succour in terms of reduction in price. This, of course, is premised on a simple logic that locally refined fuel will not be bogged down by foreign exchange issue, as naira has been drastically devalued by the Tinubu government under the same neo-liberal policies. But, as we noted in our previous analysis, this optimism cannot stand reality, not because we are soothsayers, but because Nigeria’s capitalist class, both in politics and big business, is only interested in milking the poor and working people dry, whenever the opportunity arises. Nigeria’s capitalist class is not interested in any serious developmental programme that will bring succour to the long suffering Nigerian people. This has been laid bear with the latest reality from Dangote refinery.
Many Nigerians are aghast to learn that petrol from Dangote refinery cost not just as much, but higher, than imported petrol. While no known parameters have been explained as reason for this by the Dangote refinery, it is not difficult to situate this within the horrible arrangement under which the Nigerian state propped up Dangote. As we noted in previous analysis, Dangote business history shows that the business is an ultra-profit maximizer. For instance, its foray into cement and sugar manufacturing has been characterized by monopolistic tendency aimed at price gouging. It is therefore not surprising that Dangote’s cement has been considered as very costly, even by international standard. This is in addition to domination of the market, which allows it to manipulate price. The so-called reduction in the price of petrol from N970 to N950 per litre for marketers announced on November 24 by Dangote Refinery is merely a cheap gesture to gain ‘good’ publicity as it translates to very little or nothing for the final consumers
The domination of every market where Dangote operates has been directly and indirectly supported by the Nigerian state, which has doled out, at various times, mouth-watery concessions to him, including tax waivers, subsidized dollar allocation, manipulating product standards, free trade zone, and raising fund for Dangote. This has also been repeated in the refinery business of Dangote. The deliberate and wicked grounding and sabotage of Nigeria’s flagship state-owned refineries, under the control of Nigerian National Petroleum Corporation (NNPC), has provided the fertile ground for the rise of Dangote refinery.
Subsequently, the lazy Nigerian capitalist political class has handed over the task of solving developmental problems of the country to mega-billionaires like Dangote and multinational corporations, offering them everything the country owns as appeasement. While NNPC could not refurbish or build new refineries, it however invested over $2.7 billion (over N4.1 trillion) in Dangote refineries, an action which was a disguise for helping Dangote refinery solve its liquidity problem. More than this, the Dangote refinery is situated in so-called free trade zone, where huge concessions, including tax and tariff waivers are given. Therefore, the Nigerian state has helped to create a monopolistic monster in Dangote. It is this power that Dangote is deploying to control the supply of fuel.
However, Dangote’s belief that the country will be at his mercy, while he also maximises profit from the suffering of Nigerians seems to be faltering. Firstly, oil industry is highly regulated with long-existing international players who are much experienced in the industry. These players have secured business commitment with local importers and marketers. On the contrary, Dangote is relying solely on its strategic position as a local monopoly refiner, but at the same time wants to maximise profit by selling petrol at international price. The quest for maximum profit by Dangote is expressed in recent comment by Aliko Dangote, after a recent meeting with Nigeria’s president. Expressing his frustration over failure of local marketers to buy his petrol, he noted, “if I will be able to collect the naira, I can actually charge somebody 32 percent in interest. So right now, that is what I’m losing…” (The Cable, 29/10/2024).
While the Dangote refinery relies on free trade policy that allows it to operate as an international corporation and sell its products at international price, it is at the same time exploiting the petroleum industry act to demand automatic and forced patronage from fuel marketers. It is therefore not strange that Dangote refinery has sued the Nigerian government, relying on Petroleum Industry Act to demand patronage (Premium Times, 22/10/2024).
It needed to be added nonetheless that, aside Dangote’s quest for maximum profits, by exploiting Nigeria’s dire fuel crisis, the cost of setting up Dangote refinery adds to the high cost of its products. For instance, the $20 billion-worth refineries, has been funded not only through equity from other Dangote businesses, but also through local and international debts, which automatically adds to the cost of its products. This means that the interests on loans and profits on equity will be factored into cost of its products. Furthermore, the collapse of public infrastructure meant that Dangote had to build all its infrastructures including roads, power supply, seaports, etc., all of which automatically adds to its production cost.
Notwithstanding these realities, a long-term business is not expected to recoup all its costs within a year or start making huge profits immediately. But the unstable local and global capitalist environment itself makes it difficult for long-term planning, especially for monopolistic businesses like Dangote. For instance, the global shift towards clean and renewable energy systems may affect oil and gas business, even though big oil corporations are still waxing stronger. Thus, the quest for quick and maximum profits by Dangote in its refinery business is situated within the rottenness of Nigeria’s capitalist system and global crisis of capitalism. That the Nigerian state cannot maintain functioning state-owned refineries is not just a product of failure of Nigeria’s political class, but also an ideological shift away from state control of economy to neoliberal market fundamentalism.
Nigerians, especially working people, must realise that there is no way out of fuel crisis through the private sector. Unless the oil and gas industry is put under public ownership and control, with democratic management, private big businesses like Dangote will only exploit the helpless conditions of Nigerians to further maximise profits, while they worsen already bad situation. This is why the labour movement must demand direct state control of the oil industry, with compensation only on the basis of proven need, and of fuel pricing and supply. This should start with immediate reversal of fuel price increase that has worsened living conditions for majority of Nigerians. The currently do-nothing attitude of the leadership of labour unions is a betrayal of Nigerian working people and the principle of labour unionism in Nigeria.
In conclusion, it is clear that capitalism, especially the naked neocolonial version, is injurious to the wellbeing of majority of Nigerians. This has been pronounced by the anti-poor policies of the Tinubu government. Only a socialist system, premised on democratic ownership, control and management of the mainstay of the Nigerian economy, including the oil and gas industry, can liberate the working people, youth and the poor, economically and socially. This is what the Democratic Socialist Movement (DSM) stands for, and we enjoin those who seek genuine solution from the current morass to join us.