Predatory Pricing, Market Dominance, and the Future of Competition in Nigeria’s Downstream Petroleum Sector.

A Legal and Economic Critique of Systemic Monopoly Power under the FCCPA, 2018.

By Charles Ude Esq.

Introduction:

This paper examines the legal and economic implications of monopoly power and abuse of dominance within Nigeria’s competition law framework. It interrogates the emerging dominance of the Dangote Group across strategic sectors of the Nigerian economy, most notably the downstream petroleum market,through the prism of the Federal Competition and Consumer Protection Act (FCCPA), 2018.

Particular attention is directed at the recent fuel price reductions announced by the Dangote Petroleum Refinery. While these reductions appear, at first glance, to offer immediate consumer relief, they raise profound concerns under competition law regarding predatory pricing, market foreclosure, and long-term consumer welfare. The paper concludes by advancing legal arguments and proposing structural remedies necessary to safeguard competition and protect the public interest.

I. Monopoly and Market Dominance under Nigerian Competition Law

1. Conceptual Framework

In classical economic theory, a monopoly exists where a single firm controls the entire supply of a product or service within a defined market, thereby possessing the power to determine prices, output, and quality without competitive restraint.

Nigerian competition law adopts a more nuanced and functional approach. Under Section 70 of the FCCPA, 2018, the relevant inquiry is not monopoly per se, but dominance, defined as a position of economic strength that enables an undertaking to act to an appreciable extent independently of competitors, customers, and consumers. While the mere possession of dominance is lawful, its abuse is expressly prohibited under Section 72 of the Act.

2. Market Consequences of Monopoly and Abuse of Dominance

A dominant or monopolistic market structure typically generates the following adverse economic and social effects:

Market Effect Description

Exploitative Abuse (Consumer Harm) Excessive pricing, reduced output, or deterioration in quality, resulting in a transfer of wealth from consumers to the dominant firm (Section 72(2)(a)).
Exclusionary Abuse (Competitor Harm) Practices designed to eliminate or deter competitors, including predatory pricing, refusal to deal, tying arrangements, and discriminatory trading conditions.
Stifled Innovation The absence of competitive pressure reduces incentives for efficiency, technological advancement, and innovation.
Rent-Seeking Behaviour The diversion of resources from productive activity toward lobbying for protectionist policies, import bans, or regulatory barriers that entrench dominance rather than promote efficiency.

II. The Dangote Group and the Structure of the Nigerian Petroleum Market

1. Systemic Dominance Across Strategic Sectors

The Dangote Group occupies a commanding, often near-monopolistic, position in several strategic Nigerian markets, including cement, sugar, and flour. This dominance has been facilitated not only by economies of scale and vertical integration, but also by historical government policies such as import bans, tariff protections, and regulatory preferences that insulated these markets from meaningful competition.

With the commissioning of the Dangote Petroleum Refinery, the Group is now positioned to exercise overwhelming influence in Nigeria’s downstream petroleum sector. Current projections suggest reliance on a single private undertaking for over 90% of petrol (PMS) supply, and effectively 100% of diesel and aviation fuel. Such concentration represents a profound transfer of pricing and supply power from the competitive market, and indeed from the state, to a single corporate entity.

2. Fuel Price Reductions and the Illusion of Benevolence

Mr. Aliko Dangote has publicly announced substantial reductions in petrol prices, including reported gantry prices as low as ₦699 per litre, presenting the move as an effort to “compete with imports” and ease the burden on Nigerian consumers.

While these price reductions appear beneficial in the short term, competition law requires regulators to look beyond immediate consumer gains and assess long-term market structure and competitive effects. When aggressive price cuts are undertaken by a dominant firm with unparalleled financial depth, they raise serious concerns of predatory pricing, a well established form of exclusionary abuse.

III. Predatory Pricing and Market Foreclosure

1. The Doctrine of Predation

Predatory pricing occurs where a dominant undertaking deliberately sets prices below cost, or below sustainable competitive levels, with the strategic objective of eliminating competitors or deterring market entry, only to raise prices once dominance is secured.

Under Section 72 of the FCCPA and the Abuse of Dominance Regulations, 2022, such conduct constitutes unlawful exclusionary abuse.

The Dangote Group’s ability to cross- subsidise losses in the petroleum sector using surplus capital derived from its cement, sugar, and flour operations creates a classic “deep pockets” effect. Independent importers and marketers, lacking comparable financial resilience, cannot withstand prolonged price suppression, particularly when such reductions are strategically timed to undercut incoming fuel cargoes.

2. Long-Term Harm to Consumers and the Economy

The principal danger of predatory pricing lies not in the price cut itself, but in its aftermath. Once competitors are driven out of the market:

The dominant firm can impose supra-competitive prices;

Consumers lose meaningful choice and bargaining power;

Innovation and service quality deteriorate; and

The national economy becomes vulnerable to the operational and strategic decisions of a single private actor.

Thus, short-term affordability may conceal long-term exploitation and systemic consumer harm.

IV. Rent-Seeking and Regulatory Capture

A further dimension of abuse arises where a dominant undertaking leverages its strategic national importance to influence regulatory and policy outcomes. Efforts to enforce restrictive domestic supply obligations, challenge competitors’ import licences, or advocate for import limitations constitute classic rent-seeking behaviour.

When political or regulatory influence is used to raise barriers to entry rather than to compete on merit, efficiency, or innovation, such conduct falls squarely within Section 72(2)(c) of the FCCPA, which prohibits practices that artificially limit production or technical development to the prejudice of consumers.

V. Conclusion and Prayer for Structural Remedies

A mere cease-and-desist order is inadequate to address dominance of this magnitude. Pursuant to Section 114 of the FCCPA, the Competition and Consumer Protection Tribunal should consider structural remedies designed to preserve competition in a sector critical to national security and economic stability, including:

1. Enforced Transparency

Mandatory disclosure of independently audited cost and pricing data for ex-depot fuel sales, to enable effective monitoring and prevention of predatory pricing.

2. Asset and Functional Separation

Divestiture or functional separation of logistics and distribution assets to ensure that access to transportation, depots, and supply chains is not monopolised by a single dominant producer.

The objective is not to penalise commercial success, but to ensure that Nigeria’s markets remain open, competitive arenas, rather than private enclosures governed by unilateral corporate power.

Charles Ude Esq
Legal Practitioner and Author
Email: Charlesude2014@gmail.com