By Abdulwasiu Hassan
Africa’s largest oil refinery and the biggest single train refinery in the world is being launched in Nigeria on Monday by the country's outgoing president Muhammadu Buhari.
The Dangote Petroleum Refinery and Petrochemicals built in the city of Lagos by Africa’s richest man, Aliko Dangote, has the capacity to refine 650,000 barrels of crude oil per day. Some say this could be a game changer for Nigeria and neigbouring countries.
Despite being a leading oil producer in the world, Nigeria relies on importation of refined petroleum products for domestic consumption because for decades, its four state-owned refineries have not been functioning properly.
This leaves huge deficits in fuel supply causing frequent shortages and sharp price increases.
Nigeria, Africa's largest economy, usually exports its crude oil and imports refined products. Economists say this situation is not economically viable.
The country has spent more than $12.44 billion on fuel importation 2022 alone, according to the country’s central bank.
The Dangote refinery promises to refine enough crude oil for Nigeria with even excess for export.
In a statement ahead of the facility's launch, the Dangote Group, owners of the refinery said the plant has ''177 tanks of 4.742 billion litres capacity.''
It also said although the refinery is designed for 100% Nigerian Crude, it has the ''flexibility to process other crudes'' including Middle-Eastern Crudes and the US Light Tight Oil.
''At full capacity, it can meet 100% of the Nigerian requirement of all refined products and also have surplus for export,'' the company added.
With a population of more than 200 million, Nigeria consumes an estimated more than 60 million litres of petrol per day, according to officials.
Over the years, Nigeria produces around two million barrels of crude oil per day and its economy heavily relies on oil revenues.
This means any major change in the oil sector - positive or negative - has an impact on the economy.
Most of the oil is produced in the southern Niger-Delta region but recently oil deposits have been discovered in the north of the country and production due to start in earnest.
Multi-purpose facility
Located in Lekki Free Trade Zone in Lagos, Nigeria’s commercial capital, the Dangote refinery has been built on a piece of land that was a swamp, but has now been sand-filled.
It was initially conceived as a smaller project in 2013 but later expanded and work started in 2016.
Sitting on about 2,635 hectares of land, the refinery complex comprises an oil refinery, petrochemical plant and fertilizer processing facilities with its purpose-made port and power source.
There were scepticisms about the project from the start with some commentators suggesting that Nigeria’s investment climate was not conducive due to worsening insecurity with armed groups carrying out attacks including on oil facilities.
But the billionaire Nigerian industrialist, Aliko Dangote, ignored sceptics and pushed on with the project citing the potential benefits of the refinery including helping to address the security problems.
“Once you create a lot of jobs, they will have less people that will join them in doing all these attacks,” Aliko had said when asked by journalists whether the attacks by militants in Nigeria could affect his confidence in the refinery project.
Benefits beyond Nigeria
The company, Dangote Group, says the refinery has the capacity to refine crude oil from with Nigeria and outside the country. It is also expected to export some of the refined petroleum products.
With the refinery becoming operational, it is likely to reduce cost for African countries that usually import refined petroleum products from outside the continent, according to Idakolo Gabriel Gbolade, a financial expert in Nigeria.
This is because they might no longer need to import from far away. But it is not immediately clear how long it will take for the refinery to start operating at its full capacity of 650,000 barrels a day.
Mr Gbolade who is heading a financial risk management firm, SD&D Capital Management Limited told TRT Afrika the refinery has the capacity to ''ensure that Nigeria gains over $10 billion annually from export proceeds'' and it will help the country to largely reduce its trade deficit. He said this will help to strengthen the value of the Nigeria’s currency, the Naira.
Ahead of the commissioning of the project, Nigeria's state oil company NNPC has supplied the refinery with 300,000 barrels of crude oil ''for the commencement of its operations,'' an aide to Nigerian president Muhammadu Buhari says.
Can it bring pump price down?
The construction of the Dangote Petroleum Refinery and Petrochemicals was initially planned to start in 2013 to be completed in three years at an estimated cost of $8 billion.
But it didn’t start until 2016 and was further delayed due to economic problems and the impact of Covid-19 pandemic. The cost also rose to about $19 billion due changing economic factors.
Despite years of delays, the facility has finally been completed raising hopes for more fuel supply in Nigeria.
The President of African Development Bank Group, Akinwumi Adeshina, could not hide his joy and optimism during a visit to the site of the project in Lagos.
“This is actually an industrial frigate in which Nigeria and Africa can launch from here into global markets,” he said. Mr Adeshina described the project as “Africa’s growth acceleration company.”
Financial expert Gbolade is optimistic the project will also potentially create ''over 100,000 both direct and indirect jobs.''
However, experts point out that the refinery might not start operating at its full capacity immediately to refine the promised 650,000 a day. It is also not yet clear is whether fuel prices will reduce due to the refinery operating.
The launch of the refinery comes at a time the Nigerian authorities plan to scrap fuel subsidies which could allow market forces to determine pump price. This move has already sparked fears of fuel price hikes.
Analyst Gbolade believes despite the potential challenges ahead, the Nigerian economy and “average Nigerians will benefit from the refinery'' when it becomes operational.
