Finally, the much awaited commissioning of Dangote Refinery, the largest of its kind in the world and by extension, the largest vertically integrated petrochemical complex in the world, will take place on January 24 by President Muhammadu Buhari.
Originally slated to open in 2022, the Dangote Refinery was delayed by some issues, including a lack of access to foreign currency, a weak economy, and the COVID-19 pandemic, which delayed the arrival of refinery equipment and disrupted supply lines.
This game-changing 650,000bl/d Dangote refinery is now expected to add enormous value to the economy and change the direction of oil business in the country.
After the commissioning, smaller modular facilities are to follow soon after. The $19bn Dangote project is a privately owned Nigerian conglomerate, although the Nigerian state-owned NNPCL holds a 20 percent equity stake and the government has been an enthusiastic backer.
The refinery will be Africa’s largest refinery by some margin, dwarfing existing facilities in Algeria and South Africa. And it is also “the world’s largest single-train facility by popular acclaim.
Many Nigerians are enthusiastic about the project given its huge potential to turn oil business around for the benefits of the country.
Dr. Olufemi Omodele, director of Entrepreneurship at Redeemers University said the “Refinery when it comes on stream will eliminate enormous funds wasted on importation of crude oil and enormous foreign exchange that leads to the incessant weakening of the Naira as a result of forex demand”.
A report by Moody’s, one of the front line global rating agencies, on the state of Nigeria’s fiscal and external position, a week ago stated that when it comes on stream, the Dangote refinery would lead to a modest improvement in Nigeria’s current account.
The report hinted that the position was reached with the analysis that Nigeria would stop the importation of petrol, and also stressed that the gain would mostly arise from savings on transportation costs.
It stated that Nigeria spent over $14 billion on importing the product in 2021, adding that the Dangote refinery’s operation would also mean that Nigeria’s crude export would reduce since part of it will be used domestically.
“Dangote refinery will improve Nigeria’s current account modestly when fully operational. Substituting imported refined petroleum by domestic products will save current transport cost and other related costs on an import bill that reached $14 billion in 2021.
“Indeed, while Nigeria would no longer need to import refined petroleum, it would also lower the country’s export of crude oil since a part of the production would be used domestically,” Moody’s said.
As an oil exporter, it stated that while Nigeria was set to benefit from higher oil prices this year, its economic and financial performance have gradually deteriorated since the beginning of the year, as illustrated by subdued growth at +3.5 per cent year-on-year over the first half of 2022.
Moody’s averred that so far, higher oil prices remained positive for Nigeria’s fiscal accounts because revenue derived from oil production at two per cent of Gross Domestic Product (GDP) in 2021, still outweighed the growing cost of the country’s oil subsidy programme at 1 per cent of GDP in 2021.
“However, constraints on oil production on the one hand and faster-growing oil consumption – incentivised by the oil subsidy and inherent to the country’s economic development – on the other, have meant that the positive impact of higher oil prices on government finances has diminished and may reverse in the future, exerting negative pressures instead,” it added.
“Financial reporting and oversight of the subsidy mechanism are weak: fiscal reporting (budget planning and implementation) focuses on net oil revenue; the cost of the fuel subsidy is not systematically reported nor audited as part of the budget process.
“Successive administrations have envisaged eliminating the oil subsidies for more than a decade now. The last plan, which was put forward in 2021, was suspended shortly after its introduction, in January 2022,” it informed. According to the ratings agency, the net financial outflows in the first quarter of 2022 exceeded Nigeria’s current account surplus, driving foreign exchange reserves down by $884 million.
“We estimate outflows amounted to $3.5 billion, and consisted of net purchases by Nigerian residents of external financial assets of $4.2 billion, which was only partially offset by higher net liabilities of $3.3 billion, resulting in net financial outflows of $1.7 billion,” it said.
The refinery is anticipated to supply all of Nigeria’s needs for refined products, with a surplus left over for export, opening up a market for $11 billion in petroleum products from Nigeria per year.
Additionally, the facility will produce 3 billion standard cubic feet of gas, 65 million litres of premium motor spirits (petrol), 15 million litres of diesel, and 4 million metric tonnes of jet fuel each day.
The Dangote Refinery will be responsible for more than half of Africa’s future refining increases, according to the Organization of Petroleum Exporting Countries.
The refinery is the greatest of all the refinery additions projected across Africa in the long term, according to OPEC, with the continent’s medium-future distillation additions estimated at 1.2 million barrels per day.
A significant accomplishment for both Nigeria and the continent of Africa is the start of operations at the refinery. With Dangote in charge, it will not only provide desperately needed refined petroleum products for internal consumption but also potentially open up a sizable export market.
In the area of unemployment, the Refinery will increase the rate of employment.
The President/Chief Executive, Dangote Industries Limited, Alhaji Aliko Dangote, had last year unveiled plans to increase the human capacity of the Dangote Refinery Project site from 40,000 to 57,000 personnel in the coming months.
As at the time he spoke in 2022, the project employed 29,000 Nigerians and 11,000 foreigners.
This is a ratio of around three Nigerians to one expatriate at present, which will increase for local talent with the new additions.
Speaking in Lagos in a recent broadcast, which aired on Arise TV, Dangote said the refinery project remained the biggest in Africa and one of the biggest in the world, adding that many Nigerians were getting massive training as a way to build in-country capacity.
“When we started the project, we were supposed to bring a lot of foreign workers, but as we speak today, we have less than 11,000 expatriates. We have almost about 29,000 Nigerian workers that are getting massive training. We are also creating a lot of capacity in the country, which will be of great help for future oil projects in Nigeria, most especially with the opening up of the oil industry through the new Petroleum Industry Act.
“It means that the country can boast of human capacity needed in the oil and gas sector. Most of these Nigerians can compete anywhere in the world in terms of electrical, welding, mechanical erection etc. We have actually created massive capacity,” he added.
“It makes me feel terrible to see a country as big and resourceful as Nigeria with high population, importing all its petroleum products. It is very painful. So, we decided it is time to tackle this challenge. We tried before in 2007, but we were not able to make it happen. So, we jettisoned the idea
“What actually inspired me is when you look at what happened in a country like India where entrepreneurs went ahead and created about five million barrels-per-day oil refinery. This country does not have as much oil as Nigeria.
“Nigeria is here sitting on over 2.4 million barrels per day at a point and we do not refine the oil we produce. Here, we have a country of over 200 million people and we are importing 100 per cent of what we consume.
“It is not sustainable. If you go to some places in Nigeria, you will discover that there are petrol stations that are not working. ’This actually pushed me into saying that this is a big challenge, which needed to be addressed urgently.”
Dangote described the refinery project as an investment that would transform the economies of countries in sub-Saharan Africa.
“This refinery is going to help transform, not only the oil sector, it is going to assist to transform the entire economy of Nigeria and all the countries in sub-Saharan Africa. It is unfortunate that all sub-Saharan African countries are importing petroleum products and this is not what it is supposed to be.
“It is not government’s responsibility alone to address the challenge of petroleum products’ importation in Nigeria. No, we have to collaborate with the government to tackle these issues of petroleum importation. It will put millions of people directly and indirectly at work.
“The refinery is going to massively transform the economy. By this transformation, government will have more money to take care of infrastructure, health, education. So, it is a massive transformational project,” he added.
Dangote emphasised the need for the country to shift attention from crude oil export and diversify the economy.
“We should not as a country be comfortable with generating revenue from crude oil export alone because tomorrow, people may not need crude oil. If we don’t move from crude oil to something else, we will have issues as a country. This is one of the things that I took upon myself to help address in this country,” he said.
The refinery is located in Lagos’ Lekki Free Zone.