Bishop of the Diocese of Kaduna in the Anglican Communion, has criticized Nigerian political figures over the Dangote Refinery in Lagos'

Dangote Exceeded NNPC Expectation On Refinary Monopoly

6 minutes, 25 seconds Read

President Muhammadu Buhari, who failed to deliver on his promises to revamp state-owned refineries in Port Harcourt, Warri, and Kaduna, will today commission Dangote Refinery as stakeholders assess the facility’s benefits.

Amid uncertainty over Nigeria’s fuel subsidy, the Dangote Refinery, a 650,000 barrels per day (bpd) facility expected to be the world’s largest single refinery, will add about $21 billion (N9.7 trillion at the current exchange rate) to the Nigerian economy each year, according to the Nigerian Economic Summit Group (NESG).

This comes after several stakeholders stated yesterday that Nigeria’s 445,000 barrels per day refineries, despite being restored, may become outmoded and impossible to sell in the face of the new Dangote Refinery.

Concerns are growing, however, as players who spoke in separate interviews warned Nigerians to expect increased prices since, while the new refinery shattered the sector’s monopoly, the pricing structure would have to alter.

In promises detailed in the APC policy document and manifesto, Buhari’s 100-day covenant, speeches at campaign rallies, and town hall meetings, Buhari pledged to remove fuel subsidies and fix the refineries before winning the 2015 election; however, with only nine days to leave office, the promises remained a mirage.

Despite the fact that the refineries were granted, the Port-Harcourt Refinery missed deadlines set by the Nigerian National Petroleum Company Limited (NNPCL).

While Europe is depending on Nigeria for crude export after Russia was banned, its prior dependency on African nations would be reduced on an annual basis.

With a deal to deliver 300,000 barrels per day to the Dangote Refinery, adding to its regional supplies, Nigeria presently transfers around 547.5 million barrels of crude into the worldwide market each year. With obligations to supply approximately 445,000 barrels per day to contractors on the Direct Sale Direct Purchase (DSDP) deal, the development may force Europe to rely more on the Middle East and Asia to meet its supply, while the global market may face a 700,000bpd shortfall from Nigeria.

In 2022, the West African group was delivering around 200,000 barrels per day to Europe to compensate for Russia’s loss.

On the product side, while West Africa imported approximately one million barrels per day of petroleum products last year, with 60% of all products coming from Europe, at full capacity, Dangote Refinery alone would have reduced imports by more than 65% if most West African countries turned to the refinery for supply.

Ademola Adigun, an energy expert, stated that the Dangote Refinery’s economic impact has remained good.

According to him, it is an elixir for the industry’s midstream and downstream segments because of the potential profits from commissioning.

“There is still a need for clarity in some areas,” he stated. How prepared is the refinery to provide the product? The impact of subsidies on gasoline and logistics, as well as market links, and so on.”

Adigun went on to say that current refineries may become “a little more obsolete” since finding new purchasers would be challenging.

In many ways, Segun Ajibola, former President of the Chartered Institute of Bankers of Nigeria (CIBN) and professor of economics at Babcock University, saw the new refinery as the end of an era.

In many ways, Segun Ajibola, former President of the Chartered Institute of Bankers of Nigeria (CIBN) and professor of economics at Babcock.

Dangote is likely to shake off the existing constraints imposed by the defunct domestic refineries as a profit-driven initiative.

“The refinery is expected to change some narratives in this segment of the oil and gas industry with an optimal operating template.” If Dangote Refinery is a success, it will draw more investment to the business. “Overall, government involvement in oil refining in the country may become less and less significant,” he said.

Pricing, according to Ajibola, may become a concern, particularly at the start-up stage, depending on the refinery’s operational costs.

Dangote, he claims, may price its products commercially and without subsidies.

University, saw the new refinery as the end of an era.
According to him, the development broke the government’s monopoly in local oil refining because the existing four oil refineries are government-owned, with a slew of institutional challenges ranging from corruption to a lack of accountability, a poor maintenance culture, and economic rent syndrome, among other issues.

“It should reduce refined product imports while also conserving foreign exchange.” The Dangote Refinery, a totally private sector-driven enterprise, serves as a suitable model for evaluating operating efficiency in the petroleum refining industry.

Ajibola stated that in the near run, contributions to national output and income, job creation, tax revenue, and foreign exchange earning potential from refined product exports to neighboring nations would be secured.

He stated that until economies of scale bring down unit costs, Nigerians may have to accept a higher than current price for Dangote Refinery goods.

Habeeb Jaiyeola, partner at PWC, stated that as a private corporation expected to provide returns for its owners, there is a need to ensure the enabling environment exists to allow the refinery to grow.

According to Jaiyeola, the downstream industry must be fully deregulated in order for owners to receive adequate returns on investment.

“Because it is built in a free trade zone, the refinery will be able to seek markets outside of Nigeria as well,” he explained.

According to the African Refiners and Distributors Association (ARDA), African refinery output will peak in 2027 at 77.6 million metric tons per year.

The association also stated that the start-up of the 650,000 bpd Dangote Refinery, which is designed from the start to produce AFRI-6 (10 ppm sulphur) fuels, would be a game changer for the continent’s clean fuels journey, bolstering Africa’s energy security while significantly reducing foreign exchange utilisation on imports.

Anibor Kragha, Executive Secretary of ARDA, stated, “We commend what the Dangote Refinery is doing to bring the refinery online.” This additional refining capability will undoubtedly transform the various African economies.”

With increased fuel demand on the African continent, Dangote Refinery is projected to handle a range of light and medium grades of petroleum, including gasoline, diesel, jet fuel, and polypropylene.

The project is planned to produce 9,500 direct and 25,000 indirect employment with an estimated investment of $19 billion and an acquisition of a 20% minority share in NNPC for $2.76 billion.

Meanwhile, Auwal Musa Rafsanjani, Executive Director of the Civil Society Legislative Advocacy Centre (CISLAC), said it is good that Nigeria now has a working refinery, albeit one that is privately owned.

He said that the action demonstrates how patriotic certain folks are by ensuring that something that would help the country in terms of job generation and income sources is built.

“The Dangote refinery will alleviate the fuel scarcity that Nigerians are experiencing by making fuel more readily available for consumption by citizens.”Furthermore, the refinery would offer Nigeria with the possibility to become an oil exporter, lowering government spending on oil imports and increasing government revenue.

Furthermore, this refinery and its products would assist the whole West African area,” Rafsanjani stated.

He, however, expressed grave worry over when the Nigerian government would commit to reviving the country’s refineries, noting that the Buhari-led administration overpromised but under-delivered on reviving the country’s refineries.

“It is deeply disappointing and disheartening to see that, despite all of the President’s promises to revitalize our state-owned refineries, he is leaving office with no legacy to look up to in terms of the current state of our refineries.” But we are not shocked, as this is one of many pledges broken by the President.

“We must remember that the President promised to fight corruption, insecurity, and create employment opportunities, especially for our teeming youths who have no work to do,” Rafsanjani stated.

He urged the new administration to restart the refineries since it would enhance oil production/consumption, generate more employment, and raise government income through the export of refined petroleum to other nations.

Similar Posts