A recent judgment by the Federal High Court in Abuja has directed the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to continue granting and renewing petroleum product import licences to Matrix Energy, A.A. Rano Nigeria Limited, and AYM Shafa Limited. This decision has sparked concerns about the future of Nigeria's domestic refining industry and the interpretation of the Petroleum Industry Act (PIA) of 2021. The judgment has raised substantial questions of law that warrant urgent appellate consideration.
At the heart of the controversy is the question of whether the National Assembly intended to establish a petroleum industry that is perpetually dependent on imported refined products or one that encourages domestic refining while permitting imports to address supply shortfalls. Section 317 of the PIA empowers the NMDPRA to apply the Backward Integration Policy to encourage investment in local refining. This policy aims to boost domestic production and reduce reliance on imports.
The PIA deliberately included provisions to encourage domestic refining and regulate petroleum product imports. Section 317(8) uses the word "may", conferring discretion upon the regulator rather than imposing an absolute prohibition on imports. However, this discretion is a statutory power that must be exercised lawfully and consistently with the objectives of the legislation. The NMDPRA's discretion to implement backward integration and regulate imports is crucial to the development of Nigeria's refining industry.
The trial judge relied on Sections 31, 32, and 211 of the PIA, read together with Section 72 of the Federal Competition and Consumer Protection Act, to conclude that the regulator must promote competition and prevent market dominance. While competition is essential to ensuring fair pricing, product availability, and consumer protection, it cannot be interpreted in isolation. The PIA envisages competition within a petroleum industry that also encourages domestic investment, production, refining, storage, and distribution.
The principle of harmonious statutory interpretation requires that legislation be read as a whole, giving effect to all its provisions rather than allowing one provision to render another ineffective. Section 309 of the PIA establishes the PIA's precedence over inconsistent provisions of other enactments in matters it governs. Consequently, the general competition provisions of the FCCPA must be reconciled with the specific petroleum-sector framework under Section 317.
A substantial question remains regarding the continued entitlement to import petroleum products contemplated by the judgment. The judgment makes the issuance and renewal of import licences conditional on the companies satisfying applicable statutory and regulatory preconditions. However, it does not expressly grant an unconditional right to import petroleum products. An appeal could properly invite the Court of Appeal to determine whether the general obligation to promote competition can override the specific statutory powers conferred upon the NMDPRA.
Nigeria must not punish those who invest in domestic production. For decades, Nigeria exported crude oil and imported refined petroleum products, effectively transferring substantial economic opportunities, industrial development, and employment to foreign economies. Today, indigenous refinery developers are making considerable investments to reverse that economic model. It would be economically counterproductive to encourage such investments on the strength of a statutory backward integration framework, only to interpret that same legislation in a manner that potentially weakens the regulatory support contemplated for domestic refining.
Key points
- The judgment has raised concerns about the future of Nigeria's domestic refining industry and the interpretation of the Petroleum Industry Act (PIA) of 2021.
- The PIA empowers the NMDPRA to apply the Backward Integration Policy to encourage investment in local refining.
- An appeal could properly invite the Court of Appeal to determine whether the general obligation to promote competition can override the specific statutory powers conferred upon the NMDPRA.
