Hope as Buhari inaugurates Dangote Refinery tomorrow

Facility to transform Nigeria from petrol import-dependent to exporter Plant takes first crude batch in June To create $21bn/annum market for Nigerian crude

The 650,000 barrels per day (BPD) Dangote Oil Refinery, which President Muhammadu Buhari would inaugurate tomorrow, is expected to meet 100 per cent of Nigeria’s demand for all refined products.

Products expected to be produced in tonnes daily include premium motor spirit (PMS), diesel (AGO), aviation jet fuel and dual purpose kerosene (DPK), among others, thus raising the hope of Nigerians.

Although production of petroleum products is not expected from the plant until later in the year, the completion of Africa’s biggest oil refinery and the world’s biggest single-train facility is projected to create a market for $21billion per annum of Nigerian crude.

According to a report released by S&P Global Commodity Insights, the Dangote Refinery is anticipating the arrival of its first crude batch in June.

However, the inauguration is generating a lot of excitement from government officials, industry players and Nigerians as it has the potential to transform Nigeria from a petrol import-dependent country to an exporter of refined petroleum products

This is coming at a time the government is proposing subsidy removal from the second half of the year. Subsidy payments steadily rose from N351bn in 2005 to N4.39trn in 2022, while N3. 6trn was earmarked to fund fuel subsidy for the first six months in 2023.

Will it end subsidy?

While it is very unlikely that the start of operation at the refinery would lead to massive reduction in price of petrol, it will reduce freight cost and enhance supply security.

The chairman of Coronation Capital, Aigboje Aig-Imoukhuede, at a recent meeting in Abuja, while noting that the decision to have fuel subsidy in Nigeria is not grounded in any economic thinking but purely political decision, stressed that Dangote Refinery would not necessarily provide solution to the subsidy regime as the facility will operate as an international entity.

“From an economic standpoint you now have the ability to refine 650,000 barrels of crude per day in Nigeria once that refinery is commissioned. On whether or not it is going to mean that you can remove fuel subsidy, the first question should be: Will Nigeria give Dangote subsidised crude oil? At what price will Nigeria give Dangote crude oil?

“If you want to continue with fuel subsidy, the only way the Dangote Refinery is going to be able to generate fuel at subinternational market price is if you give the company subsidised crude oil. Now, Dangote is not asking for subsidised crude oil, nor are Nigerians asking for subsidised crude oil,” the former chief executive officer of Access Bank Plc said.

The president of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Comrade Festus Osifo, at the 7th Triennial National Delegates’ Conference in Abuja, said that with the refinery, there would be an impact on the fuel supply dynamics.

“We welcome the bold move by operators of the Dangote Refinery coming on stream soon and hope that its addition would enhance local production, reduce products importation, as well as end the era of uncertainties in petroleum products pricing and evils of subsidy payment,” he said.

Local production, wealth creation

The International Monetary Fund (IMF) projected that the Dangote Refinery would help Nigeria’s economic recovery drive when it starts production.

The Bretton woods institution said the refinery would help the country improve its current account balance.

“With crude oil for local refining not subject to the Organisation of Petroleum Exporting Countries (OPEC) quota, the refinery also has the potential to catalyse more domestic crude oil production and boost gross domestic product (GDP),” it stated.

The African Petroleum Producers Organisation (APPO) underscored the importance of the establishment of the refinery to the continent.

The organisation said the refinery, which will supply over 12 per cent of Africa’s products demand when it becomes operational, would bring about a 36 per cent reduction in the importation of petroleum productions into the continent.

The organisation said the refinery, which will supply over 12 per cent of Africa’s products demand when it becomes operational, would bring about a 36 per cent reduction in the importation of petroleum productions into the continent.

The organisation also expressed the belief that the success of Dangote Refinery could incentivise the rise of similar projects across Africa despite the current focus on energy transition.

The president of the African Development Bank (AfDB), Akinwumi Adesina, described the refinery as the best industrialised project to happen to Africa, noting that it would positively impact the economic growth and development of Africa as a continent.

“I see a company I will proudly call Africa’s growth accelerator company. With this project, we see an acceleration of how to reduce imports. We see acceleration on how to have an outbound on export, value chain development and how to compete regionally and globally

“This project will reverse the huge sum the country spends on foreign exchange. We import about $57 billion worth of different products and export only $50.4bn, so we have to balance that with about $7bn. And talking to them here, they showed us that they could have a domestic market of about $11bn; and that is an incredible market that will save Nigeria about $9bn a year from importing petroleum products. So this is huge for Nigeria and even Africa as a continent,” he had said during a tour of the facility in 2022.

The director-general of the Lagos Chamber of Commerce and Industry (LCCI), Dr Chinyere Almona, said the refinery would save and generate foreign exchange, create jobs, positively affect the value of the naira, broaden prosperity for the downstream sector and provide growth opportunities for businesses.

“The LCCI views the refinery’s impact on the Nigerian economy as significant. It will also stimulate economic growth by impacting the country’s balance of payments.

“In addition, the Chamber expects the refinery to fuel further growth and development across its value chain, including cosmetics, plastics, textiles etc,” she said.

The Abuja Chamber of Commerce and Industry (ACCI) also said the refinery would revolutionise the oil and gas industry in Nigeria.

The federal government, through the then Nigeria National Petroleum Corporation, in 2021 signed the term sheet with Dangote Group to buy a 20 per cent stake in the refinery for $2.76bn.

The refinery’s completion will not only create direct and indirect jobs, but will also lead to skills transfer and technology acquisition opportunities that will benefit the downstream sector.

What Nigeria will benefit from refinery – Dangote, Kyari

The President of Dangote Group, Aliko Dangote, in an interview with a special edition of London-based The Economists Magazine, titled ‘The World Ahead 2023,’ said with the commencement of operation at the refinery, Nigeria could save up to $10 billion in foreign exchange and generate another $10 billion in exports

“The refinery’s completion will not only create direct and indirect jobs, but will also lead to skills transfer and technology acquisition opportunities that will benefit the downstream sector.

“Moreover, the refinery’s production of critical products like naphtha and polypropylene will stimulate the development of other industries, such as cosmetics, plastics, and textiles. Refineries on this scale could save Nigeria up to $10 billion in foreign exchange and generate approximately $10 billion from exports,’’ he said.

The Group Chief Executive Officer of

Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, said in-country refining of crude would compress the logistics cost around petrol supply by about N17/litre.

This could save Nigeria over 1.02bn daily as Kyari who spoke in an interview earlier in the year, revealed that NNPCL supplies over 60 million litres of petrol daily to keep Nigeria wet with the product.

5 presidents to attend inauguration

At least five presidents are expected to grace the commissioning, Daily Trust on Sunday exclusively gathered.

The ceremony is expected to attract serving and former governors, top government officials, captains of industries, among others.