This article is sponsored by Dangote Group
Founder of Dangote Petroleum Refinery, Aliko Dangote, underscored the significance of the flow of Premium Motor Spirit (PMS) from the refinery, saying “In the last 28 years, we haven’t really had this sort of achievement, but you can see videos from as far back as 1974 with fuel queues, and those fuel queues are still here. This will eliminate all fuel queues in Nigeria. It will improve the health of everybody and ensure a consistent supply to the market.”
As stated by Dangote, Nigeria has consistently suffered from acute fuel deficits, depending on imported refined petroleum products to meet domestic energy needs. According to the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, the country currently spends $600m on fuel importation monthly. This indicates an expenditure of $7.2bn on fuel importation for twelve months. The expenditure arose because of the failure to refine petroleum products domestically in almost three decades.
Nigeria has four existing moribund refineries. Kaduna Refinery has a refining capacity of 110,000 barrels per day; and Warri Refinery with an installed capacity of 125,000 barrels per day. Port Harcourt Refinery has two complexes. Port Harcourt I refinery has installed capacity of 60,000 barrels per day, while Port Harcourt II refinery is the complex new refinery with installed capacity of 150,000 barrels per day.
Former President of Nigeria, Olusegun Obasanjo, said the refineries will not work as long as the government is keeping hold of them. “When I was president, I invited Shell to a meeting. I told them I wanted to hand over the refineries for them to help us run. They bluntly told me they would not. I was shocked.”
“I repeated the request, and they stood their ground. When the meeting was over, I asked their big man (MD) to wait behind for a little chat. Then I asked him why they were so hesitant on not taking over the refineries. He said did I want to hear the truth? I said yes. He listed four reasons. One, he said Shell makes its money from upstream and that is where its interest lies. Two, he said they only do downstream or retail as a matter of service. Three, he said our refineries would be bad business for them, that globally, companies are going for bigger refineries because of the economics of refineries. Four, he said there is too much corruption in refineries.”
The Shell CEO summed up the problem of government-owned refineries in the fourth point: there is too much corruption in refineries. Government often appoints people to management positions in its businesses based on political affiliation and loyalty. Competence and integrity, which should form part of the criteria for selection for management positions, are neglected in favour of nepotism and cronyism. Therefore the managements of these institutions rarely focus on productive ventures, but siphon both resources and funds for servicing of personal and political patronage.
A breath of fresh air
Dangote Petroleum Refinery is coming as a breath of fresh air. It is a private sector funded refinery. The focus will be on breaking even and repaying outstanding loans secured for the building of the refinery.
Businessperson and Dangote’s close friend, Femi Odetola, captured the same thoughts in his congratulatory message: “You have not just built a refinery; you have liberated us from the chains of economic dependence that have held this nation back for far too long. The days of bowing to foreign powers for our fuel needs are over, thanks to your vision and determination,” he said.
“You have dealt a death blow to the so-called local cabals who have fattened themselves for years, feeding off our nation’s economic slavery. These cabals, who have grown rich by keeping Nigeria in a perpetual state of dependence, must now face the reality that their era of easy gains is coming to an end” he added.
Ogun State Governor, Dapo Abiodun described the refinery as “a transformative milestone… for Nigeria and the broader African continent. The establishment of this refinery represents a pivotal shift in the energy landscape of the region, showcasing the power of vision, resilience, and unwavering commitment to economic development.
“The Dangote refinery is poised to be a game-changer in the production of petrol, addressing one of the most pressing challenges faced by Nigeria: reliance on imported fuel. This dependency has not only strained our foreign exchange reserves but has also hindered our potential for self-sufficiency.”
He believes that producing petrol locally will drastically reduce the outflow of foreign currency, thereby strengthening the economy, drive economic diversification and reduce reliance on oil exports alone.
Vice President, Oil & Gas, Dangote Group, D.V.G. Edwin, says the refinery will significantly reduce fuel imports, save foreign exchange, and will contribute to stabilising the naira, lowering inflation, and reducing the cost of living among others. The refinery would lead to the protection of foreign exchange (forex) revenue of around $20bn a year at current market prices and saving of $14bn a year through domestic supplies of petroleum products. It would also create a minimum of 100,000 indirect employment through retail outlets and ease availability of petroleum products in the country.
‘Localise fuel importation’
Former Director General of Lagos Chamber of Commerce & Industry, Muda Yusuf, said that Dangote Refinery offers Nigeria an opportunity to end fuel importation. He said “We need to localise fuel importation. Luckily, we now have the Dangote Refinery. It is a great opportunity for us to localise all transactions relating to fuel supply. That will increase the transparency and integrity of the process, help strengthen our reserves, and moderate the pressure on the exchange rate.”
S&P Global, an international financial analytics firm, agrees with Yusuf. They said, “Dangote Petroleum Refinery is capable of resolving Nigeria’s forex issue and its huge pressure on the local naira currency, while also catalysing the country’s economic development.” It is expected that many byproducts of the complex would spur the growth of ancillary sectors and industries, especially in packaging and other forms of industrial activities.
It will produce crucial petrochemicals such as polypropylene, polyethylene, base oil, and linear alkylbenzenes that will grow many sectors, including the agricultural sector. Polypropylene remains a vital feedstock in various industries, including packaging, textiles, medical equipment and automotive parts.
Polypropylene bounce-back
Many players and firms in the packaging industry closed shop as they found it difficult to secure foreign exchange to import polypropylene. Now, these firms are expected to bounce back because Nigeria is becoming self-sufficient in the production of polypropylene. Dangote stated:“We are committed to ensuring that, starting in October, there will be no need to import polypropylene. Our petrochemical plant will be fully capable of meeting all local demands.”
With the refinery and petrochemical complex racing towards full capacity, Nigeria is moving out of the league of net importers of refined petroleum products to be a net exporter.
The domestic economic landscape is witnessing a transformation even as Dangote Fertiliser leads in the export of urea to many countries. A repeat in the refined petroleum sector will drive an exponential growth of the domestic economy.
Edwin is optimistic that the complex will revolutionise Nigeria’s economy. He said “It is expected that a major outcome of this project will be the evolving of more linkages in the Nigerian economy. Linkages are vital in sustainable economic and industrial development.
Many new manufacturing outfits are to emerge which depend on both the products and byproducts of the refinery as feedstock in their production processes. These linkages will create more jobs, add value to Nigeria’s crude oil products and at the same time produce more raw materials for local manufacturing.
The distributive system which sees Nigeria as an end destination will now have it as country of origin. The change comes with attendant benefits as vessels will berth and queue in Nigeria to receive products for export.”