The Dangote Refinery Vs PENGASSAN crisis.
Topic: The Dangote Refinery Vs PENGASSAN crisis.
- - A protracted strike by PENGASSAN, compounded by the Nigeria Labour Congress (NLC) joining in response to the suspension/dismissal of workers at the Dangote Refinery and allegations of sabotage, constitutes a severe asymmetric shock to Nigerian energy security and macroeconomic stability.
- The timing is especially perilous: the Central Bank of Nigeria (CBN) has recently cut the Monetary Policy Rate (MPR) from 27.50% to 27.00% citing deflationary pressures and improved external reserves (reported at about USD 42 billion). These fragile gains — lower borrowing costs, contained price pressures and improved reserves — are reversible if the strike causes fuel shortages, supply-chain paralysis, inflationary pressures and capital flight.
- Immediate, credible, mediated dialogue and an independent forensic investigation into the sabotage allegations are essential to prevent escalation, restore investor confidence and protect the narrow path of recovery.
- Context and scale
- Dangote Refinery is a transformational domestic asset (nameplate capacity ~650,000 barrels per day) intended to reverse Nigeria’s long-standing dependence on imported refined fuels. Before the refinery’s commercial operations many years of domestic fuel supply relied heavily on imports, often exceeding 80–100% of refined product consumption.
- PENGASSAN represents workers in the upstream/downstream petroleum sector; large-scale industrial action affecting a major refinery with national distribution implications can rapidly translate into shortages across transport, electricity (diesel-powered generation), agriculture, manufacturing and services.
Macroeconomic implications of a protracted strike
- Energy security and supply chain shocks
- Immediate risk of domestic fuel shortfalls if refinery operations are curtailed, undermining distribution to petrol stations, aviation and industry.
- Shortages force rapid resumption of fuel imports. That raises the trade deficit, puts pressure on foreign exchange markets, and can deplete FX reserves if sustained. - Inflation, monetary policy and financial stability
- Short-run shortages typically translate into sharp local price spikes for transport and power — an inflationary impulse that reverses recent deflationary trends.
- The CBN’s recent decision to lower the MPR was calibrated on easing price pressures and better reserves. An inflation uptick could prompt a reversal to tighter policy (higher MPR) to anchor expectations, raising domestic borrowing costs, worsening debt-service burdens and crowding out investment.
- Volatility in inflation and interest rates increases credit risk for banks and corporates, impairing lending to SMEs and delaying recovery. - External sector and reserves
- A return to heavy import dependence for refined products would increase the import bill, widening the current account deficit and pressuring reserves. While USD 42 billion provides a cushion, sustained import surges and potential capital flight raise questions about adequacy.
- Investor confidence and portfolio flows are sensitive to governance and supply stability; the strike risk could trigger portfolio outflows, exchange rate depreciation, and FX market stress. - Fiscal and growth impacts
- Fuel shortages blunt economic activity: logistics, manufacturing, commerce and agriculture would see output losses. GDP growth would be downgraded in the near term and employment losses could multiply.
- Government fiscal revenues could be affected both directly (higher subsidy/compensation costs or emergency fuel imports) and indirectly (lower VAT and corporate taxes from reduced activity). - Investment climate and long-term implications
- The dispute and public allegations of sabotage against a flagship private investment undermine the credibility of contractual security and industrial peace — key determinants of foreign direct investment (FDI).
- Multinationals and major projects assess political and labour risk; a strike of this magnitude could delay or freeze ongoing investments in the oil & gas value chain and deter future projects, diminishing longer-run productive capacity.
- Social and political spillovers
- Fuel shortages amplify public discontent, raise transport costs, and can trigger wider protests. Political pressure on government institutions intensifies, limiting policy space for measured responses.
Principles for resolution and policy recommendations
We urge an urgent, structured approach centered on de-escalation, justice, and the safeguarding of national economic stability. Key steps:
- Immediate actions (first 72 hours)
- Convene an emergency tripartite meeting within 48 hours including: PENGASSAN leadership, NLC representatives, management of Dangote Refinery, Federal Ministry of Labour & Employment, Ministry of Petroleum Resources, CBN observers and an independent third-party mediator.
- Agree on immediate humanitarian and operational safeguards: temporary limited operations where safety allows, prioritized supply to critical services (hospitals, airlines, power plants), and a temporary moratorium on dismissals until independent review is underway.
- Public communication strategy to reassure citizens, markets and investors that dialogue is underway and that contingency fuel imports are being arranged to ensure continuity. - Independent investigation and due process
- Commission an independent, transparent forensic investigation into the sabotage allegations and the circumstances of worker suspensions/dismissals. Use internationally credible forensic auditors and safety investigators; publish methodology and findings to preserve legitimacy.
- Ensure fair labour process: where dismissals were wrongful, immediate reinstatement or agreed compensation; where criminal conduct is substantiated, prosecute following due process.
Medium-term stabilizers (weeks to months)
- Establish a mediated settlement framework that addresses workers’ legitimate grievances on safety, due process, wages and collective bargaining, while protecting operational integrity and investor rights.
- Put in place a sector-specific industrial-relations roadmap: binding dispute resolution mechanisms, guaranteed minimum service levels, joint health & safety oversight committees.
- Maintain prudent macro-management: CBN should communicate readiness to respond to inflationary pressures quickly but emphasize support for dialogue. Fiscal authorities should outline contingency funding for emergency imports without undermining reserve management.
- Policy measures to protect recovery and investment
- Protect foreign investor confidence with public commitments to contract sanctity and rule of law; accelerate transparent dispute resolution mechanisms for investors.
- Use temporary, targeted fiscal measures to shield the most vulnerable from fuel-price shocks rather than broad subsidies that damage long-term finances.
- Diversify supply and resilience: accelerate strategic fuel reserve policy, incentivize distributed storage and logistics improvements, and fast-track reforms that reduce dependence on single installations. - Longer-term governance and resilience
- Strengthen labour relations frameworks across the energy sector; broaden worker participation in safety and governance.
- Institutionalize independent safety audits and whistleblower protection to reduce incentives for sabotage and to address wrongdoing without collective reprisals.
- Continue economic diversification efforts; use any settlement with Dangote and labour to catalyze local content development, skills training and industrial linkages.
- Why dialogue is imperative — an appeal
- The short-run economic savings from disruption avoidance vastly outweigh tactical gains from escalation. The narrow window of macroeconomic stability — evidenced by the CBN’s recent MPR cut and strengthened reserves — can be quickly reversed by energy shortages, inflation spikes and capital flight.
- A mediated, transparent resolution that simultaneously: (a) credibly investigates sabotage allegations, (b) restores fair employment processes, and (c) secures continuous refinery operations, is the only option that protects livelihoods, investment and national recovery.
- We therefore call on all parties — PENGASSAN, NLC, Dangote Refinery management, federal authorities and relevant regulators — to commit immediately to good-faith mediation with independent oversight and binding timelines. International partners and industry mediators should be invited if needed to buttress credibility.
Conclusion
Nigeria stands at an inflection point. The Dangote Refinery represents a generational opportunity to pivot away from fuel import dependence and anchor the broader recovery. A protracted industrial action that impedes its operation risks reversing the modest but hard‑won macroeconomic gains — lower policy rates, improved reserves and subdued price pressures — and could precipitate a return to costly imports, higher inflation, stalled investment and slower growth.
Alliance for Economic Research and Ethics Ltdgte calls for swift, transparent, and mediated action to resolve this crisis: safeguard national energy supply, uphold labour rights and due process, and preserve the fragile economic recovery for the benefit of all Nigerians.
About The Alliance for Economic Research and Ethics (AREET) LTDGTE: The Alliance for Economic Research and Ethics (AREET) LTDGTE is a Nigerian non-profit working to strengthen both the private and public sectors in Nigeria. It achieves this by conducting independent evidence-based research, advocating for sensible policies, providing regulatory support for businesses, bringing stakeholders together, and promoting transparent ethical reforms to improve Nigeria's "Ease of Doing Business".
Thank you.
Dele Kelvin Oye
Chairman, Alliance for Economic Research and Ethics Ltd/Gte.
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