Market competitiveness and monopolies in energy sector

“Policies that convey static, short-term cost advantages but that unconsciously undermine innovation and dynamism represent the most common and profound error in government industrial policy.” Michael Porter

Governments also regulate markets to prevent insider trading, abuse of market share powers, maintaining the integrity of financial ecosystems, protecting vulnerable investors, safeguarding local industries, compliance with global best practice, punishing perceived and real competitive threats, or indeed to accord with the ideological orthodoxies of incumbent governments etcetera.

According to the National Bureau of Statistics Nigeria’s exports trade in the first quarter of 2024 was dominated by crude oil exports valued at N15,486.63 billion or 80.80% of total exports. And, Nigeria’s energy sector creates direct and indirect employment for millions of people. So, the multiplier effects of Nigeria’s energy impact the construction, services, and manufacturing catalysing economic growth.

Against that backdrop, market competitiveness, innovation, efficiency, transparency in the oil and gas value-chain are, quite simply, non-negotiable. Crude oil export is effectively a monopoly.

Ordinarily, the combined production capacity of the four state-owned monopoly refineries; and the DR, is 1,095,000 bpd, is almost sufficient to meet domestic demand and, when functioning optimally, reduce Nigeria’s ginormous petroleum importation bill. In the final analysis, there is scarcely any justification for Nigeria’s continued importation of refined petroleum products at an annual cost of approximately $18.7 billion, the opportunity cost of which is underinvestment in critical healthcare, education, transport, public infrastructure, policing and national security.

Ojumu is the Principal Partner at Balliol Myers LP, a firm of legal practitioners and strategy consultants in Lagos, Nigeria, and the author of The Dynamic Intersections of Economics, Foreign Relations, Jurisprudence and National Development.Before flagging, please keep in mind that Disqus does not moderate communities. Your username will be shown to the moderator, so you should only flag this comment for one of the reasons listed above.

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