IT’s rare to find a multibillionaire who hasn’t had nasty battles. Yet, as battles go, the fight between Aliko Dangote, the founder of the Dangote Refinery, and the CEO of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, is among the most spectacular that Africa’s wealthiest man has had to fight in recent times.
It won’t be a surprise if the resignation of Ahmed (and the chief executive of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe) on Wednesday marks a pause, rather than an end, because the problems run very deep.
Dangote’s cement and noodle wars were rough. They earned him many scars and lifelong bitter enemies. Yet, in retrospect, they look like skirmishes compared to the battle to secure the refinery. This battle has pitted him against vested state interests that have enjoyed the vast pleasures of a rentier economy for decades.
Scalding Like Fire
In scalding press statements and advertorials signed by Dangote this week, he accused Ahmed of living above his means, with children attending elite Swiss schools that cost up to $5 million in fees. He challenged him to show how he could have afforded that from his legitimate income.
Dangote followed up on his press statements by filing a petition against Ahmed with the Independent Corrupt Practices and Other Related Offences Commission (ICPC), which is believed to contain even more damaging allegations than what was publicly disclosed.
The man who is usually microphone-shy is not only shaking the table but also calling out the regulator in a multi-layered war for self and country.
Not even when President Umaru Musa Yar’Adua revoked the sale of the Port Harcourt and Kaduna Refineries to Bluestar in 2007, after the Dangote-led consortium paid $670 million to seal the deal, was the fallout as bitter as it has been since the Dangote Refinery was commissioned.
Greasy As Oil Business
The reason is simple: Oil is not just a business; it’s political power. Unlike cement and noodles, oil does not just respond to history, it shapes and drives it.
Two great books that shed light on oil and political power are “The Seven Sisters: The Great Oil Companies and the World They Shaped” by Anthony Sampson (1975) and “The Prize” by Daniel Yergin (1990), with the latter, which won a Pulitzer, offering a riveting account of the battles between pioneers in the oil industry and the state actors they fought.
When John D. Rockefeller transformed the oil industry from a curiosity into a global industry through Standard Oil, for example, it began as a joke. The state was not interested. Coal was the primary driver of global energy supply at the time, and oil didn’t seem to have a promising future.
Rockefeller secured the supply chain from transportation and refining to the markets until the 20th century, when oil became a strategic military asset. The British navy converted its fleet from coal to oil, and Winston Churchill insisted on state involvement in the oil industry. That changed everything.
After two world wars fought with oil as a decisive factor, and producer states claiming to have defeated corporate dominance, new problems have emerged to show that oil pioneers almost always collide with entrenched power once they threaten the existing rent structure.
Ahmed’s Fall
Ahmed has fallen, but he may have fallen to save the system. While the war raged, he not only represented a regulatory agency, but he was also the nexus where pioneer desperation and entrenched power collided.
The accusation that Ahmed’s children are in foreign schools that his legitimate income cannot afford will be sniffed at in many circles for at least two reasons: a) regulators’ income is usually set to match industry levels, which means that Ahmed’s income may be comparable to those in the oil industry, and b) leaving above means is the rule rather than the exception, especially in the public service.
An attempt to enact a law for public officers and their families to use only public schools and health institutions has been stalled at the First Reading stage in the House of Representatives since July. It may never progress, even at gunpoint.
In his over 38-year career, Ahmed has built a cosy relationship with petrol importers. At PPMC, the pipeline subsidiary of NNPC, he wielded petrol import licensing power like a commercial actor. Even when he later became a regulator requiring impartiality and fairness, he still behaved like a commercial actor, earning him a reputation as the standard-bearer of the rentier status quo.
The Godfathers
The Nigerian godfathers of oil rent, to paraphrase Yergin, are putting up fierce resistance against the new dynamics Dangote’s entry is bringing into the industry. Ahmed is not the last stand, only a symbol of it. Just as Dangote often asks himself why he didn’t put his $20 billion elsewhere instead of a refinery, the state may occasionally regret why it gave him the licence in the first place.
It’s a struggle for market share and ultimately, profit, a struggle for “the world’s biggest and most pervasive business…” In this fight, the vested interests who have always hidden behind public bureaucracy for self-enrichment are suddenly aware that an independent player is changing the game, if not the rules.
In November, the NMDPRA had advised President Bola Ahmed Tinubu to shelve plans to ban imports of refined petroleum because local output could not meet the national demand, put by the regulator at 55 million litres daily.
Dangote countered the claim, arguing that the regulator was distorting the actual refining capacity by reporting offtake statistics instead of the true production data. He also argued that continued importation of petrol hurts jobs, investments, and undermines Nigeria’s energy security.
It’s The Rent, Stupid!
Incumbents rarely say, “We want to protect rents.” They say, “We’re protecting the system.” Yet, for decades, continued petrol importation has not only drained billions of dollars from the country, but also encouraged the importation of low-quality, vehicle-damaging products. Apart from that, an estimated N11.35 trillion (approximately $25 billion) spent on repairing the country’s state refineries has ended up in the pockets of freeloaders, unaccounted for.
Herein lies the state’s dilemma. Whatever the pretences of the managers of the state oil company and their godfathers in high places, state actors are not neutral. Ahmed’s fight is their fight; his fall may well be a strategic reset. NNPC is a centre of elite capture, and they know that reforms would dilute their discretion, make them vulnerable and dismantle their rent.
Monopolist At Work?
Does Dangote aim to become a monopoly? Perhaps. Is his fight altruistic? Unlikely. But if the regulator had tried to be more like a regulator, rather than an antagonist, it would have done at least two things: a) addressed the moribund state-owned refineries and tackled refinery licencees who have been AWOL, and b) applied the relevant provisions of the Petroleum Industry Act for a fair and transparent pricing framework.
But rather than try to make a difference, Ahmed was too accustomed to the old ways – rents from fuel imports, foreign exchange arbitrage, subsidy-era patronage networks, and, not to mention, the political leverage built on scarcity.
Dangote must accept that Ahmed was only a symptom of a deeper, systemic problem. The only proof that Ahmed was not removed to save the system is that he should be investigated so that he can either clear his name or face the consequences.
- Ishiekwene is Editor-In-Chief of LEADERSHIP and author of the new book A Midlifer’s Guide to Content Creation and Profit.