Earlier this week, the Minister of Information and Culture, Lai Mohammed paid a visit to the soon-to-begin operations Dangote Refinery Complex. The minster’s appraisal of the project was broadly positive, citing the key role it would play in industrial revolution for Nigeria and Africa at large. Additionally, he commented about the impact on economic growth as well as possible FX savings. Truly, recent occurrences in the energy space as further reinforced the need for Nigeria to have its own refineries to ensure steady availability of petroleum products. In addition, the recent rally in oil prices, caused by the ongoing Russia-Ukraine conflict, and recent supply crunch has placed Nigeria at a disadvantage as the nation continues to import refined petroleum products at soaring prices effectively consuming nearly all the FX earned from oil exports. This has created an extended FX crunch and an overvalued Naira.
To resolve these challenges, hopes of Nigeria being able to refine its own crude is hinged on the launch of the Dangote refinery. Truly, the Dangote refinery is a state-of-art facility that has capacity to supply Nigeria’s refined petroleum products need with a planned starting capacity of 524,000 bpd (c.81.0% capacity utilisation). However, concerns remain around the perpetual postponement of the commencement of operations which continues to leave the country at the mercy of imported petroleum products as well as stalling any willingness to revive state-owned refineries. In a recent communication, the refinery is expected to commence operations in Q3-2022.
Freeing Nigeria from the clutches of imported fuel would require credible partnership between the government and private sector to ensure ongoing projects such as the Dangote refinery, and modular refineries are seen to completion. Local refining has the potential to free up scarce FX resources and ensure uninterrupted availability of fuel. Lastly, it could be the key that brings an end to the contentious subsidy regime, freeing up government’s resources.
