Nigeria’s powerful oil unions challenge Dangote refinery

When one of Nigeria’s powerful oil unions took on the Dangote Refinery in a labour dispute in the last week of September, it was a fight between two giants – and the country felt the impact. Oil output fell, supply chains were disrupted and the economy faced paralysis before the government brokered a truce.

The immediate spark for the dispute was the laying off of about 800 employees of the $20bn Dangote Refinery, the 650,000 barrels per day facility reputed to be the world’s largest single-train refinery. The ostensible spark for the dispute was a reorganisation that the company said was aimed at curbing sabotage. But the Petroleum and Natural Gas Senior Staff Association of Nigeria (Pengassan), representing white-collar workers, said the refinery management had prohibited unions at the plant and fired workers who were attempting to unionise. The union responded by calling a nationwide strike of its members that started on 28 September.

The right to join a union

“Under Nigerian law and international best practice, employees have the right to join a trade union of their choice,” said Elvis Asia, a Lagos-based lawyer and chartered arbitrator. “Victimising employees on that basis is not permissible.”

Members of the Dangote Refinery branch of Pengassan said in a statement that there was an urgent need to unionise in the face of perceived discrimination against them when compared with terms offered to expatriates from India and Pakistan. They allege that on 25 September the refinery management sent employees a questionnaire asking them to indicate their membership in Pengassan. Those who affirmed their membership were said by the union to have been subsequently terminated.

Management denounces ‘terrorists’

The Dangote Refinery said its operations were unaffected by the strike but had fighting words for Pengassan. “The oligarchs in Pengassan have proved themselves to be terrorists and turned the association into a bully organisation,” said the refinery management.

Pengassan president Felix Osifo declared that Nigeria “is bigger than Pengassan, the way it is bigger than Dangote and the presidency”. He insisted that the union will always stand up for its legitimate rights.

“We have been around for 50 years – before the Dangote Refinery came on stream,” Osifo said. “Should this same event occur again tomorrow, our approach will be exactly the same.”

While the strike lasted Nigeria saw a 16% drop in oil output, amounting to about 283,000 barrels per day, as loadings were delayed at the oil-export terminals. A cut in gas supplies to power stations of about 1.7bn standard cubic feet per day reduced power generation by a fifth. The state-owned Nigerian National Petroleum Company (NNPC) reported that missed trades during those three days resulted in “significant revenue losses”. There were also disruptions to domestic fuel supply, with long lines forming at petrol stations, and a sudden uptick in prices for other goods as the economy priced in the fuel cost increase.

Union demands met

The price of the strike was too big to pay for President Bola Tinubu’s administration. Following mediation overseen by the government, the Dangote Refinery management agreed to reinstate the workers or transfer them to other companies within the conglomerate without loss of pay. The workers’ right to membership of unions was also recognised by the Dangote Group. In other words, it was a victory for Pengassan, which then called off the strike after three days.

Beyond threatening government revenue in the short term, the strike also revealed systemic vulnerabilities with wider ramifications for the economy. With the failure to revive state-owned refineries, the Dangote Refinery is now the backbone of Nigeria’s domestic refining capacity, and when it sneezes the whole economy catches a cold.

For downstream distribution, disruption quickly translates into supply bottlenecks that influence prices. The sharp jump in cooking gas prices due to the strike brought the message home for many Nigerian families.

The cost of energy has severe implications for virtually all of Nigeria’s production and distribution of goods and services, which makes disruptions politically sensitive. At a time when Tinubu is hoping to reap the benefits of his tough economic measures, including ending subsidies and floating the exchange rate, the refinery labour dispute was viewed as a major threat.

After the deal, government ministers reaffirmed their support for the Dangote Group. At an economic summit in Abuja on 6 October vice president Kashim Shettima accused the oil union of holding the country to ransom over a minor dispute. “Aliko Dangote is not an individual, he’s an institution and he’s a leading light in Nigeria’s economy permanently,” said Shettima. “How we treat this gentleman will determine how outsiders will judge us.”

His position was backed by budget and planning minister Abubakar Bagudu, who said at the same event that the refinery is “systemically too important” and should be “supported at all costs”.

More labour challenges on horizon

Pengassan is one of two oil industry unions that have had to contend with both the government and international energy companies in the past decades over workers’ rights in Africa’s top oil-producing country. The other is the blue-collar National Union of Petroleum and Natural Gas Workers (Nupeng). Both unions have in the past shown a readiness to confront the government and the oil majors.

Tension is mounting between Dangote Refinery and Nupeng over the company’s decision in September to deploy 4,000 trucks powered by compressed natural gas (CNG) for fuel distribution. This would bypass a system largely operated by Nupeng members, raising union fears of job losses. A strike threat by the union in September was averted only by the intervention of state security officials who worried about the wider impact of such a strike.

The Dangote Group insists that the CNG fleet is meant to improve product supply efficiency. It says it will create more than 24,000 jobs for drivers, mechanics and others. It later announced that it plans to deploy 10,000 distribution trucks.

In an October 15 memorandum to the House of Representatives Committee on Petroleum, Nupeng said that democracy can’t exist without the protection of workers’ rights. “Let it not be forgotten that Nupeng and Pengassan played a historic role in restoring Nigeria’s democracy,” Afolabi Olawale, the general secretary of the union, told lawmakers. “That same democratic spirit must now protect the rights of workers who keep the nation’s energy sector alive.”

Strikes show dangers of monopoly

For Nigeria, the disputes reveal the risks of a near monopoly controlling the supply of one product. While the Dangote Refinery has the capacity to meet Nigeria’s domestic demand, estimated at 50m litres daily, Dangote currently supplies 20m litres daily, according to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Though more than 25 refineries are licensed in Nigeria, only about six are currently operational: the Dangote Refinery and five with capacities of between 5,000 and 10,000 barrels per day. A 200,000 barrels per day refinery is being built by Nigeria’s BUA Group in Akwa Ibom state.

“As a country, Nigeria is in urgent need of a diversified investment approach in our energy mix, to further drive an expansion in the economy beyond the traditional focus on fossil fuels,” says Farouk Ahmed, chief executive officer of the NMDPRA. “As we invest in that infrastructure, we must also ensure we diversify our energy sources and reduce dependency on any single fuel.”