By Mahmud Shuaibu Ringim
With the official launch of petroleum products from the Dangote Refinery, marked by the comments of Alhaji Aliko Dangote, flanked by Mr. Edwin and Hajia Fatima, the refinery’s entry into the Nigerian market is now a reality.
Aliko Dangote’s journey in navigating the complex challenges, sharp bends, and narrow bridges that characterized this project deserves a standing ovation for several significant reasons:
1. Plugging Leakages and Siphoning: The refinery has successfully blocked the leakages and siphoning of Nigeria’s resources through the importation of petroleum products, thereby conserving foreign exchange for the country.
2. Exposing Endemic Corruption: The project has highlighted the endemic corruption within the Nigerian National Petroleum Corporation Limited (NNPCL), particularly its failure to make its refineries functional despite the colossal funds spent on turn-around maintenance and the large sums paid to idle staff over the years.
3. Unmasking Trade Union Hypocrisy: It has also exposed the hypocrisy of PENGASSAN and NUPENG, the trade unions that remained silent in the face of monumental corruption and mismanagement of Nigeria’s oil resources.
4. Relieving Nigerians of Hardship: By ensuring the consistent availability of petroleum products, the refinery has spared Nigerians the hardship caused by the chronic scarcity of these products and the exorbitant prices they have been forced to pay.
5. Creating a Stable Environment: The refinery has fostered a stable environment for the production, marketing, and smooth, uninterrupted supply of petroleum products to filling stations across the country.The products from Dangote Refinery meet international standards and have the potential to eliminate queues at filling stations. The refinery will help determine actual national demand and save Nigeria 40% of its foreign exchange currently spent on importing petroleum products. This will reduce pressure on the value of the Naira against the US dollar, thereby boosting the overall performance of the economy.
In marketing terms, the key challenge for Dangote Refinery lies in the smooth distribution of its products to the market, given the lack of a clearly defined method for distributing products from the refinery site in Lagos to other parts of the country, particularly in the absence of its own depots.
To overcome potential distribution difficulties and ensure consumers can access products at affordable prices, it is advisable for the refinery’s management to lease existing depots owned by the NNPCL. This would facilitate a smoother distribution process.
Dangote Refinery has focused extensively on the production arm of its business but has yet to reveal its marketing strategy for getting its products to the final consumer. The refinery’s approach to physical distribution and pricing remains undisclosed. Questions arise about whether the refinery will employ the services of the Independent Petroleum Marketers Association of Nigeria (IPMAN) or sell to major marketers like the “Seven Sisters,” who have depots across the country. Independent marketers also own storage facilities in Lagos where they keep their imported products.
On the matter of pricing, it is essential for the refinery’s management to develop a pricing template that does not factor in the value of the dollar at the prevailing market rate, especially since the President has directed the NNPCL to sell crude oil to the refinery in Naira. The price might be determined on an ex-factory basis. While the government has no direct hand in the business, the implications of subsidy may resurface in Dangote’s pricing template, presenting a challenge for uniform pricing across the country.
The Dangote Refinery must master the delicate art of market entry without relying on government involvement. NNPCL, its major competitor, has an extensive distribution network and established pricing strategies. However, NNPCL is currently facing significant financial challenges and has opted to outsource the management of its refineries.
It is crucial for the refinery to develop its critical success factors and identify risk mitigants early in its market entry strategy. As it enters the introductory stage of its product life cycle, the refinery must navigate its learning curve with caution and strategic foresight.
As Nigerians eagerly anticipate a constant supply of petroleum products at reasonable prices, Dangote Refinery is prepared to tackle the marketing challenges ahead, having already mastered the production aspect. Its ultimate success will be determined by a well-crafted marketing strategy that addresses pricing, distribution, and promotional components.
Dangote Refinery, welcome to the Nigerian downstream petroleum products market as a competition—an industry rife and matured with NNPCL as a monopolist.
Mahmud Shuaibu Ringim
HALIM Consulting Ltd
mahmudshuaibu44@gmail.com
