Experts have raised concerns about the potential negative consequences of the NNPC’s recent announcement as the sole buyer of refined products from Dangote’s refinery.
Alaba Olusemore, a leading development economist and public policy analyst, warned that the monopsony arrangement could lead to higher gasoline prices, limited availability of fuel, and potential disruptions to the Nigerian economy.
In an exclusive interview, with CEM, Olusemore highlighted the risks associated with this market structure. He explained that when a single buyer controls the market for a particular good or service, they have significant bargaining power.
“This monopsony arrangement means the NNPC will be the only entity purchasing gasoline from this private refinery, creating a precarious situation: a monopsonist dealing with a monopolist.’
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The lack of competition could give Dangote’s refinery more leverage to negotiate higher prices for its refined products. These increased costs would likely be passed on to consumers in the form of higher gasoline prices. Additionally, the arrangement could limit the availability of gasoline, as the NNPC may not be able to purchase sufficient quantities to meet domestic demand.
“The ripple effects on production, distribution, and pricing could be devastating.”
Olusemore emphasized the importance of fostering competition in the refining industry. He argued that a more competitive market would have provided consumers with greater choice and potentially lower prices.
The expert’s analysis comes at a time when Nigerians are already grappling with rising costs of living. The potential for further increases in gasoline prices could exacerbate these challenges and have a negative impact on the overall economy.
Beyond the direct impact on consumers, the monopsony arrangement could also have broader implications for the Nigerian economy. Higher gasoline prices can lead to increased transportation costs, which can affect the prices of goods and services. This, in turn, can contribute to inflation and erode the purchasing power of consumers
“With reduced crude oil exports and potential gasoline scarcity, the Nigerian consumer will bear the brunt of higher retail prices. The government will strive to recoup lost revenue in dollars, further inflating costs. ”
Olusemore called on the government to take steps to address this situation. He suggested that the government could encourage more private sector participation in the refining industry or explore alternative sources of fuel, such as renewable energy.
“We predicted this outcome in 2023, on Channels TV prime time news, when the refinery was inaugurated. Now, instead of celebrating a new dawn, we are left lamenting—back to square one with no relief in sight.
“The promise of affordable fuel remains a mirage in the scorching desert of Nigeria’s economic landscape. Sad development indeed,” he added.
As the country moves forward, it is imperative that the government carefully considers the implications of this monopsony arrangement and takes decisive action to mitigate any potential negative consequences for Nigerian consumers and the economy as a whole.
