The Dangote Refinery, located in Lekki Free Zone, Lagos State, was commissioned recently by the then President Muhammadu Buhari, amid expectations that the new refinery will positively impact the economy. When it commences full operation in August, the refinery is primed to alter the course of refining of petroleum products and reduce the cost of imported petroleum products, which has been a major drain on federal government’s revenues.
Nigeria’s fuel imports have been on the rise for many years now. According to the National Bureau of Statistics (NBS), the federal government spent N1.5trillion to import fuel in the Q2 of 2022. This represents the highest expenditure for fuel imports in the last four quarters between Q2, 2021 and Q1, 2022. The new refinery will signal the end of the contentious fuel subsidy, already announced by President Bola Ahmed Tinubu.
Developed with an estimated investment of about $19billion, and an acquisition of 20 per cent minority shareholding worth $2.76billion by the Nigerian National Petroleum Company Limited (NNPCL), the refinery will generate 9,500 direct jobs and 25,000 indirect jobs. Built as an Integrated Refinery and Petrochemical Complex, it has an installed capacity to process 650,000 barrels of crude oil per day, as well as produce a range of refined petroleum products, including 53 million litres of petrol, four million litres of diesel, two million litres of aviation jet fuel and liquefied petroleum gas.
The refinery will ensure adequate refined petroleum products for both domestic use and export. This will substantially reduce Nigeria’s dependence on imported refined petroleum products. It will also save the country billions of dollars in foreign exchange. Currently, Nigeria’s petroleum consumption needs are estimated at about 450,000 bpd. The new refinery will produce in excess of 30 per cent of the required amount of petroleum products Nigerians need. With this feat, Dangote Refinery has broken the monopoly earlier held by the defunct Nigerian National Petroleum Company (NNPC).
The new development will soon change the pricing mechanism of petroleum products. The new refinery is billed to export petroleum products to 53 African countries that hitherto depend on other markets for their petroleum needs. This could well be a game changer for the downstream market on the continent. This is good news for Nigeria’s oil and gas industry which has been stressed. The economic benefits are, indeed, enormous. As the largest single-train petroleum refinery in Africa and one of the biggest in the world, the country is estimated to save about N7trillion in fiscal expenditure within the next five years. Also, the refinery is expected to add $21billion to the economy.
We commend the founder of Dangote Group and Africa’s richest man, Alhaji Aliko Dangote, for his vision and entrepreneurship in actualising the refinery in spite of the initial challenges. We urge other investors in the oil sector to learn from the Dangote example. It is commendable that the new refinery will ensure that within the end of 2023, the facility will be able to satisfy the demands of Nigeria for high quality petroleum products and eliminate the reliance on imported petroleum products.
With the coming on stream of Dangote Refinery, the era of importation of toxic fuel is over. Dangote Refinery will transform the country’s economy and change the narrative in the downstream petroleum industry. At present, Nigeria sends 547.5 million barrels of crude into the international market annually, with an agreement to supply 300,000 bpd to the Dangote Refinery. With this arrangement, the Dangote Refinery will have reduced the import of refined petroleum products by 65 per cent if most West African countries turn to its refinery for supply. This will be an elixir to both the midstream and downstream segment of the oil sector.
Despite the deliverables from the Dangote Refinery, the Federal Government should rehabilitate the four moribund refineries in Port Harcourt, Kaduna and Warri, for which billions of dollars had been spent in their routine Turn Around Maintenance (TAM), with little results to justify the huge investment. We urge all those with licences to build modular refineries to emulate Aliko Dangote. Besides, the new government should provide the enabling environment for the private sector to thrive.