Dangote refinery was geared to terminate once and for all oil imports to Nigeria, an African nation that is still importing oils, which dents its foreign exchange reserves.
The refinery was unanimously hailed as a breakthrough against oil imports, an inflation buster, the naira redeemer, reduced cost and improved quality.
However, the same variables that the Dangote refinery was targeting to achieve became her constant toothache! This article reviews the issues confronting the mega refinery investment in African soil, which is still hobbled by antagonists determined to undermine it.
When fully operational, the Dangote Refinery in Lekki, Nigeria, is expected to have a capacity of 650,000 barrels of crude oil per day. This makes it the world’s largest single-train refinery.
The Dangote Refinery is an oil refinery owned by the Dangote Group that was inaugurated on May 22nd, 2023, in Lekki, Nigeria.
The Dangote Petroleum Refinery covers an area of approximately 2,635 hectares, about 1,757 times the size of a football pitch.
The Pipeline Infrastructure at the Dangote Petroleum Refinery is the largest anywhere in the world, with 1,100 kilometres to handle 3 Billion Standard Cubic feet of gas daily.
The Refinery alone has a 435MW Power Plant that can meet Ibadan DisCo’s total power requirement.
The refinery will meet 100% of Nigeria’s requirements for all refined products and have a surplus for export.
Also, read As Oil Markets Ignore Middle East Conflict, Tanzania Observes: Is There a Hidden Threat?
Dangote Petroleum Refinery is a multi-billion dollar project designed to process Nigerian crude oil and other crudes and create a market for $21 billion per annum.
Why, Then, Despite Ticking All the Benefits, Boxes Being Sabotaged?
Bad habits that die hard are what seem to frustrate the Dangote refinery.
Nigeria imports various oil products, including refined petroleum and crude petroleum, from many countries, amounting to billions of dollars per annum.
Nigeria imports Refined Petroleum primarily from Belgium ($6.83B), the Netherlands ($5.61B), India ($2.37B), Norway ($1.64B), and the United Kingdom ($923M). Between 2021 and 2022, Belgium ($5.04B), the Netherlands ($1.99B), and India ($1.38B) were Nigeria’s fastest-growing import markets for refined petroleum.
Nigeria’s Oil Imports Are a Significant Strain on Its Economy:
Trade balance: Most of Nigeria’s oil export revenue is spent on importing goods and services, creating a negative trade balance.
Currency pressure: Nigeria’s overdependence on imports puts pressure on the naira, which affects the economy through inflation.
Fuel subsidies: The IMF says fuel subsidies could cost Nigeria up to 3% of GDP this year.
Nigerian Oil Exports
Nigeria, with a population of over 232 million (Data 2024), is the largest economy in Africa, mainly due to its rich crude oil reserves.
Crude oil, discovered in Nigeria in 1956, is now the backbone of the country’s economy, with petroleum exports accounting for around 90% of the country’s total exports.
Nigeria is currently the second-largest producer of oil in Africa and a member of OPEC.
However, despite being a significant producer of crude oil, Nigeria still relies heavily on imported refined petroleum products to meet domestic demand, with over 80% of the demand being met through imports.
In 2020, Nigeria imported $7.75 billion of refined petroleum products, becoming the world’s 17th largest importer and one of the highest in Africa.
This is deeply disturbing considering that the country has four significant refineries with a combined refining capacity of 445,000 bpd (barrels of oil per day) pre-Dangote refinery era, which was more than enough to meet domestic demand.
However, these refineries have been non-functional since the 1990s due to poor turnaround maintenance, low capacity, obsolete technology, fuel scarcity, and poor government investment.
As a result, Nigeria depends heavily on imports from countries in Europe, Asia, and South America, with refined crude oil imports from the EU being the gist of this article.
The Dangote refinery, encompassing the latest technologies, was supposed to solve domestic refinery output problems.
However, a combination of factors initially delayed the Dangote refinery’s operation. When launched, it still met business and parliamentary objections based on monopoly, low quality, and extortionate pricing!
Also, read Tanzania Forging Partnerships with Global Mining Giants, A Watershed Moment in Mining Sector
Dangote companies have objected to those criticisms, citing their operation of one of the world’s state-of-the-art quality control laboratories and the international standards of their refined oil products.
Moreover, the conglomerate said the prices offered are benchmarked with global oil prices, which are much lower than those of imported refined oil products. Also, prices differ between bulk orders and no ones, with the former enjoying discounted prices.
Whenever imported refined oil products are sold in Nigeria at lower prices than the Dangote refinery, the quality is the main casualty, and the African conglomerate rests her case.
With billions of dollars annually expended in importing oils to Nigeria, definitely and without a doubt, there are winners and losers no sooner did the Dangote refinery come into play.
Some Nigerian energy experts allege that local oil refinery output has been shrinking as part of sabotage to ensure most oils are imported. This has indented the Nigerian naira’s stabilization and fomented artificial scarcity that has dwarfed the GDP growth over the years. Snarling inflation is a perennial source of anger and disaffection among the populace.
The chief losers with the Dangote refinery now involved in adding additional value to domestic oil production are foreign oil importers and their supporting cast, which is defined as local politicians and bureaucrats who have aligned their insidious interests with those of foreign operators.
No wonder the critics have enjoined hands to discredit the Dangote refinery that will potentially save billions of dollars annually, with some conservative estimates placing those figures at $21 Billion per annum. So, the credible claims of the Dangote
refinery posing a serious threat to oil importers cannot be underestimated, sparking a furore of brickbats that this gargantuan effort is regrettably accosted.
The soft underbelly of the oil importers cannot resolve the economically suffocating issues that the Dangote refinery is now resolving: pipping inflation, stabilizing the naira, eliminating persisting endemic oil scarcities, improving quality, capping pollution and poor engine performance caused by poor-quality oils.
As the overall situation stands, the long-term viability of the Dangote refinery shows that it will overcome these teething issues and establish itself as the present and future of the Nigerian oil refinery.
It has a huge potential to export Nigerian refined oil to the rest of Africa without being punctuated by overseas middle merchants.
Little do the economic saboteurs and sycophants know that the more pain [accusations] they inflict on the innocent great patriot of Nigeria, the greater will be his vindication and joy, the more will be his fortunes when the storm is over.