Nigerian President Muhammadu Buhari inaugurated on Monday in Lagos the mega-refinery of billionaire Aliko Dangote, which aims to fully meet the fuel needs of Africa’s most populous country and even to export fuel to the continent.
Nigeria (population 215 million) is one of the largest oil producers in Africa, yet it imports almost all of its fuel due to the failure of its state-owned refineries. And fuel shortages plague the daily life of its inhabitants. Launched in 2013, the more than $18.5 billion industrial project (double the original cost) is “the largest single-train refinery in the world,” according to the Dangote Group, and is expected, at full capacity, to have the largest crude refining capacity on the African continent.
“This complex has the capacity to process 650,000 barrels of crude oil per day, which will enable our country to achieve self-sufficiency in refined products, and even have reserves for export,” President Muhammadu Buhari said Monday from the site, which covers 2,635 hectares of land in the Lekki Free Zone. “This is an important step for our economy and a game changer for the oil sector, not only in Nigeria, but on the whole continent,” he added in front of several African heads of state and Nigerian officials.
Presidents Mohamed Bazoum (Niger), Macky Sall (Senegal), Nana Akufo-Addo (Ghana) and Faure Gnassingbé (Togo) came to the inauguration. Nigeria’s new president, Bola Ahmed Tinubu (the ruling party candidate elected in February), who is due to take office next Monday, was not present. He was represented by his vice president Kashim Shettima. “Our first objective is to ensure that in this year we will be able to fully meet the demands of our country,” said businessman Aliko Dangote at the inauguration.
Submarine pipelines with a length of 1,100 kilometers have been installed to connect the oil-rich Niger Delta to the industrial complex, which in addition to the refinery also has petrochemical and fertilizer plants.
Exporting to Africa
The industrial site was built next to the new Lekki deepwater port, which will be inaugurated in 2022, and which is intended to relieve congestion at the port of Lagos, but also to export some of Dangote’s refined oil to other African countries. According to Mr. Dangote, eventually, “at least 40% of the refinery’s capacity will be available for export, which should result in significant foreign exchange earnings for the country.
During his speech, he assured that the first petroleum products should be put on the Nigerian market “before the end of July, beginning of August this year”. But while the commissioning of the refinery has been repeatedly postponed since 2021, analysts are skeptical of the date. “It is unlikely that the first products will be available in August, it will probably be at the end of the year,” says Tunde Leye, of Nigerian analytics group SBM intelligence.
“It is expected that the refinery will be running at full capacity only at the end of 2024,” he adds, noting that the refinery’s opening was most likely moved up for political reasons. It comes one week before the departure of President Buhari, who is stepping down after two terms marked by a serious deterioration of the economic situation (double-digit inflation, fuel and foreign exchange shortages, rampant poverty, etc.).
According to the analyst, the Dangote mega-refinery should enable Nigeria to put an end to frequent fuel shortages, but also increase the quality of fuel in circulation. He doubts, however, that it will immediately lower the price of fuel in Nigeria “because Mr. Dangote has been forced to borrow massively. “He’ll have to pay back those loans quickly, so he’ll sell the oil at market price,” he says.
Others, such as Amaka Anku of the Eurasia Group, believe that the new refinery may represent an “opportunity for the government to succeed in removing fuel subsidies. For until now, Nigeria has traded its estimated billions of dollars worth of crude oil for imported fuel, which it then subsidizes to keep the market price artificially low, a financial drain.
Analysts say the system encourages corruption and prevents the state from investing heavily in key sectors, such as health and education, while nearly half of Nigerians live in extreme poverty.