June 9, 2023

Nigeria’s new Dangote petroleum refinery is Africa’s largest, capable of producing 650,000 barrels per day and addressing the country’s oil supply crisis. The refinery’s first product is scheduled to hit the market by the end of July 2023.

The refinery, which is owned by Nigerian industrialist and Africa’s richest man, Aliko Dangote, is anticipated to increase domestic refining capacity and eliminate the existing consumption shortage. It will also lessen reliance on imports and boost economic growth.

It is the country’s first privately owned crude oil refinery. Nigeria’s existing refineries have failed to meet rising demand for petroleum products due to operational inefficiencies under government management. Imports of significant magnitude have become necessary.

Currently, Nigeria imports more than 80% of its refined petroleum products. The country is Africa’s top importer of refined petroleum products. As a result, domestic production will significantly reduce the country’s import cost.

According to the Central Bank of Nigeria, the cost of petroleum product imports into Nigeria more than doubled over a five-year period, from around US$8.4 billion in 2017 to US$16.2 billion (an annual average of US$11.1 billion), before rising further to US$23.3 billion by end-2022.

According to the central bank, if Nigeria continues to rely on petroleum imports, the average annual cost of petroleum product imports might exceed US$30 billion by 2027.

With Dangote refinery filling the supply gap, this money may now be saved.

In prior research, I discovered a relationship between Nigeria’s reliance on crude oil exports and its limited domestic refining capability. This is also true for Mexico, which exports oil to other countries.

Reduced reliance on oil imports
The most significant impact of the Dangote refinery will be an increase in domestic refining capacity, which will cut imports.

The Dangote refinery is expected to supply 100% of Nigeria’s refined petroleum product needs (gasoline, 72 million litres per day; diesel, 34 million litres per day; kerosene, 10 million litres per day; and aviation jet, 2 million litres per day), with excess goods for the export market.

The refinery’s refined petroleum output, combined with that of other refineries in Nigeria, is projected to cover the predicted daily consumption of 72 million litres of fuel.

Historically, the country has had periodic fuel shortages, which have resulted in price increases for transportation and essential foodstuffs.

newest fuel

Refining crude oil locally allows the country to pay for the refined product in naira, saving scarce foreign exchange while generating cash from exported refined petroleum products.

According to the Central Bank of Nigeria, the Dangote refinery may save Nigeria between $25 billion and $30 billion in foreign money per year.

Assistance to Related Industries
The construction of the refinery is also expected to lower production costs for sectors that rely on petroleum products such as diesel to power their operations. As a result, they should be more competitive in the global market while also promoting local industrial strengths.

The refinery could also foster the growth of ancillary industries in and around it. The refinery’s development and operation, for example, will aid enterprises in transportation, housing, and telecommunications.

Furthermore, the refinery should generate employment and business opportunities.

Approximately 40,000 employees were employed when the refinery was being built, including 29,000 Nigerians and 11,000 foreigners.

Engineering, construction, manufacturing, and operations were among the jobs available.

According to reports, the refinery is fully operational.

Potentially increased carbon footprint
The Dangote refinery’s operation raises worries about its potential influence on Nigeria’s net zero emission targets. Net zero is an ideal situation in which the quantity of greenhouse gas emissions created and the amount of greenhouse gas emissions removed from the environment are balanced.

Decarbonisation activities are essential for countries to attain net zero, however the road and timeframe may differ since countries may prefer to transition to renewable energy through a gas-led approach.

President Muhammadu Buhari committed to net-zero emissions by 2060 at the COP26 climate change meeting in 2021. This is being done to preserve Nigeria’s ecology and ecosystem from the effects of climate change, as well as to reduce the country’s greenhouse gas emissions.

Nigeria has an Energy Transition Plan in place to move the country closer to a more sustainable economy. Natural gas will be used more extensively as a “transition fuel” under the strategy.

Oil refineries account for around 4% of worldwide carbon emissions.

The Dangote refinery meets World Bank, US, European, and Nigerian emission and effluent standards.

The Dangote refinery is a crucial step toward Nigeria’s energy self-sufficiency.

The refinery, however, remains dependant on fossil fuels and is not a long-term solution to Nigeria’s energy demands.

Nigeria has a large potential for renewable energy, including solar and wind power.

Renewable energy can be used to meet Nigeria’s energy needs in an environmentally friendly way. As a result, the Dangote refinery should be regarded as a stepping stone toward a shift.

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