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Now that Dangote refinery has commenced production

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The heart-warming news broke on Friday, January 12, 2024. The tale is that $18.5bn Dangote Refinery and Petrochemical Company, which was commissioned on Monday, May 22, 2023, has finally commenced production seven months after it was inaugurated with pomp and circumstance in Lagos. Recall that during the commissioning exercise, former Central Bank of Nigeria governor, Godwin Emefiele, said  that in ensuring the successful completion of the project, the CBN provided over N125bn to cover the domestic currency requirements of the venture, while also ensuring the availability of foreign exchange to pay for the importation of some of the machinery. He projected that the Dangote refinery could earn Nigeria foreign exchange savings of between $25bn and $30bn yearly, stressing that the impact of the savings would be directly reflected in Nigeria’s foreign exchange reserves by reducing the pressure on the country’s balance of payments.

Given the processing capacity of 650,000 barrels per day, the ex-CBN governor said the refinery was more than able to meet all of Nigeria’s domestic fuel consumption, which is about 450,000 barrels per day, while the excess production would be available for export. According to Emefiele, under the administration of President Bola Tinubu, Nigeria will cease importing petroleum products, fertiliser and petrochemicals that drained the country of over $26bn in 2022. He opined that the refinery would have an enormous impact on job creation by generating thousands of direct jobs and millions of indirect jobs, with over 135,000 permanent jobs for Nigerians. He also stated that the project would generate up to 12,000MW of electricity.

According to the billionaire businessman, Aliko Dangote, the plant will meet 100 per cent of the Nigerian consumption need of all refined products (gasoline, 53 million litres per day; diesel, 34 million litres per day; kerosene, 10 million litres per day, and aviation jet, two million litres per day) and has a surplus of each of the products for export. He disclosed that 80 per cent of the production could also be discharged through trucks across the country. Speaking on the benefits of the refinery to the country, he said: “The refinery will make available vital raw materials for a wide range of manufacturers in the plastic, pharmaceuticals, food and beverages, construction and other industries with massive job opportunities.” Moreover, the facility would put an end to the inflow of toxic substandard petroleum products into Nigeria.

Though the company has started with the production of diesel and aviation fuel before moving on to petrol output, I’m very happy that the waiting game is over and that the jinx has finally been broken and operations have effectively commenced. It is expected that the Port Harcourt refinery currently undergoing Turn Around Maintenance will come on stream too later this year. These two, together with the three modular refineries located in Edo, Rivers and Bayelsa, should be able to help solve Nigeria’s lingering energy crises which have drained our foreign exchange earnings.

I was on the  Abuja programme named ‘Editors Roundtable’ 20, 2024, to discuss this good news. As I said on the programme, the Dangote refinery coming on stream will boost economic activities in the country. Aside from the aforementioned, there will be revenue accruing to the government through taxes, royalties and levies. This refinery will provide needed raw materials for many industries as well as stimulate the establishment of other petrochemical companies. An online source reported petroleum products to include gasoline, distillates such as diesel fuel and heating oil, jet fuel, petrochemical feedstocks, waxes, lubricating oils, and asphalt. The source also listed 144 products out of the purported 6,000 that could be made from petroleum. What is being said here is that the value chain of refined petroleum products is very long and will stimulate a lot of businesses.

I’m sure the hospitality business, restaurants, and other micro, small and medium enterprises will spring up around the Dangote refinery corridor. This new refinery should also put an end to the perennial shortage of petroleum products which have led to long queues and loss of highly productive man-hours. There was a question I couldn’t answer on the earlier referenced radio programme, which was, if the commencement of operation meant there would be a reduction in the price of petroleum products. It’s a tricky question because I don’t know if the Nigerian National Petroleum Company Limited will sell crude to Dangote in naira or dollar and whether the price will be fixed throughout the year or subjected to the vagaries of the price of crude oil in the international market.  As we know, capitalists, especially a monopoly, will aim for super profit.

Will the Dangote refinery put an end to pipeline vandalism and oil theft? Will it not cause traffic gridlock in the Lekki–Epe expressway corridor? What is the state of the three modular refineries the NNPCL claimed had earlier been completed under the Buhari administration? What will be the environmental impact of the refinery on the vicinity of the site as well as the general atmosphere of Lagos State? The NNPCL should also tell Nigerians if the huge resources expended on the repairs of our oil pipelines have made it safe to transport refined petroleum products through them or if are we condemned to trucking alone.  Is there a plan to link the Dangote refinery by rail so that these refined products can also be evacuated via cargo trains?

The success story of the Dangote refinery should incentivise other licensees who are yet to start building their own refineries to immediately commence operations. The market is huge and the demand is inelastic as the request for petroleum products is eternal even in this wave of clamour for transition to clean energy.  The big challenge before our government is to put an end to pipeline vandalism and oil theft. Premium attention should also be paid to road safety, especially by articulated vehicles which will now be conveying refined petroleum products from the Dangote refinery to the hinterland. The federal and state road safety marshals need to work collaboratively to reduce accidents along the location of the refinery.

I am super excited by the planned move by the NNPCL to seek private companies for the operation and maintenance of its Port Harcourt refinery in Rivers State. This was made public on Monday, January 15, 2024.  It is noteworthy that concerns have been raised that if the current managers of the facility who allowed it to go into ruins are allowed to manage the refurbished refinery, it will go comatose again. Thus, it is a wise decision to have private companies take over the management of the operations of the company. I do hope those who will be chosen are those who have a track record of competence to handle the refinery and not political jobbers whose sole aim will be personal aggrandisement.

: @jideojong

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