Nigeria’s Dangote Refinery, owned by Africa’s wealthiest individual, was recently commissioned with the goal of ending the country’s reliance on fuel imports. Nigeria, Africa’s largest oil producer, has long struggled with fuel shortages. The refinery, with a capacity of 650,000 barrels per day, is regarded as a game changer that has the potential to turn Nigeria into a net exporter of petroleum products. Analysts warn, however, that difficulties in securing crude supplies may cause a delay in reaching full production this year.
President Muhammadu Buhari’s administration sees the Dangote Refinery as a solution to Nigeria’s persistent fuel shortages, which have even impacted the country’s presidential election. Last year, Nigeria spent $23.3 billion on petroleum product imports and consumed approximately 33 million litres (8.7 million gallons) of gasoline per day. The refinery hopes to make Nigeria a major petroleum product export hub by exporting excess gasoline. Aliko Dangote, Africa’s richest man and the refinery’s financier, intends to export diesel as well.
The massive petrochemical complex, which costs $19 billion, is billed as the world’s largest single-train refinery. Its construction, however, was beset by significant delays, lasting nearly a decade and exceeding initial cost estimates of $12-14 billion. According to Nigeria’s central bank governor, the refinery currently has an outstanding debt of approximately $2.75 billion. The complex also includes a 435-megawatt power station, a deep seaport, and a fertilizer unit. Dangote emphasized the importance of increasing production to meet Nigerian demand, with the goal of eliminating the country’s reliance on imports.
President Buhari attended the commissioning ceremony, but concerns about crude supply remain. Dangote intends to start crude refining operations in June, but industry experts at London-based research consultancy Energy Aspects believe it will be later in the year. The refinery is expected to reach 50-70 percent capacity next year, with additional units coming online gradually until 2025.
The refinery requires a steady supply of crude oil to function properly. Nigeria’s oil production, on the other hand, has been declining due to factors such as oil theft, pipeline vandalism, and underinvestment. In April, production fell below one million barrels per day, falling short of Angola’s output. This decline may jeopardize the ability of the Nigerian National Petroleum Corporation (NNPC), the state-owned oil company with a 20% stake in the refinery, to meet its agreement to supply 300,000 barrels of crude oil per day to the Dangote Refinery. According to economist Kelvin Emmanuel, who authored a report on oil theft, the refinery may need to import crude from traders such as Trafigura and Vitol rather than relying solely on domestic sources. This potential reliance on imports runs counter to the original goal of local refining, which was to conserve foreign currency and keep prices low.
Nonetheless, Energy Aspects believes that the Dangote Refinery could address Nigeria’s petroleum deficit, reshape the Atlantic basin petroleum market, and export diesel that meets European Union specifications in the long run. While challenges remain, the commissioning of this refinery represents a significant milestone in Nigeria’s efforts to become self-sufficient in petroleum production and reduce its reliance on fuel imports.
