DAILY TRUST
The name Aliko Dangote does not require a key, either smart or analogue, to open the doors to most of the 54 African countries.
The industrialist, who has been Africa’s richest man for years, has ventured into various sectors over the past three decades before finally taking the challenge of building an oil refinery.
Nigeria, despite being a major exporter of crude oil in Africa, does not have a functional refinery to hone its crude. This has caused the country to continue to spend billions of dollars on importation of refined petroleum products.
Aliko Dangote has before now, been into the manufacturing of cement, sugar, noodles, and fertilisers, among other valuable products.
Over time, he has been accused of exhibiting monopolistic tendencies. He is seen to be taking advantage of his closeness to “his friends in power” to corner various privileges like waivers to enhance profits for his various businesses. However, the recent controversy over the operations of the Dangote Refinery has opened a new vista. A lot of Nigerians believe that though he is human and therefore imperfect, the aggressive tactic of the regulators in the oil and gas industry in handling some issues of disagreement between the government and the Dangote Industries Limited (DIL), reeks of subtle push to promote some “vested interests”.
This development happened at a time when a video of the current British Prime Minister, Keir Starmer, went viral. In the video, Mr Starmer is seen expressing regrets at the way corruption, as well as certain actions and inactions of some vested interests have stymied the growth and development of Nigeria, a country he said, has the greatest potential to not only be the leader in Africa, but also one of the leading nations in the world.
The story of Nigeria’s many battles to sustain local refining is all too known by the average Nigerian. Successive governments have pumped in billions of Naira with no tangible results to show for those expenditures.
The absence of a fitting refinery has seen the country also fritter resources under the guise of fuel importation, fuel subsidy and crude swap.
Absence of petroleum refinery and attendant costs to Nigeria
Nearly 70 years after the discovery of crude oil in commercial quantities, Nigeria’s oil and gas downstream sector is yet to develop to expected levels.
The federal government spent N12.05 trillion on maintenance and rehabilitation of refineries, as well as fuel subsidy under the President Muhammadu Buhari administration, more than enough to build a brand new 650,000 barrels per stream day (bpsd) refinery, the like that Aliko Dangote has built.
Such a new refinery would have been bigger than the three moribund refineries built many years ago by the Nigerian government. Over time, the refineries had guzzled billions of naira in the name of “upkeep”, yet cannot produce enough refined oil to meet the country’s domestic consumption needs.
The four refineries have a combined 445,000bpsd capacity. Port Harcourt refinery complex (old and new site) has 210,000bpsd, Warri has 125,000bpsd and Kaduna has 110,000bpsd capacity.
The collective failure of the refineries has forced the oil-rich Nigeria to depend on importation of refined petroleum products after exporting the crude.
Sadly, a large chunk of dollars accruing to Nigeria is being used to import the refined oil for domestic use, obstructing channelling of the funds to social and economic development of the country, the largest on the continent in terms of population. Nigeria is projected to have over 220 million people.
According to the 2023 full-year foreign trade data, Nigeria incurred about N7.5 trillion in fuel import costs throughout 2023, compared to N7.7 trillion in the previous year. Using the 2023 exchange rate, the country spent approximately $7.7 billion on fuel importation in that year.
The importation of motor spirit, also known as petrol, has cost Nigeria a staggering N23.5 trillion over the last five years. Fuel importation proved particularly costly for Nigeria in 2022 and 2023, with a combined expenditure of N15.2 trillion—more than half of the total cost incurred in the last five years.
Shining examples from far and near
There are 18 oil-producing countries in Africa, based on March 2022 data by Trading Economics, a global market website. Nigeria is the largest of them with 1,238 million bpsd oil production, overtaking Libya (1,220mbpsd). Angola is the third, Algeria is fourth and Egypt is fifth (562mbpsd).
The rest, comprising Congo DR, Gabon, Ghana, Equatorial Guinea, Sudan, Chad, Cameroon, Ivory Coast, Tunisia, Congo Brazzaville and Niger Republic, have less than 500,000bpsd oil production each. According to a McKinsey Refinery Capacity Database Report of 2020, there were over 600 operating refineries around the world as at the beginning of 2017. As of 2020, 20 African countries had refineries, with some having more than one.
The McKinsey data revealed that Antwerp city in Belgium hosts the three refineries with 767,000bpsd that Nigeria patronises. These Belgian based refineries are owned by ExxonMobil (307,000bpsd), Total (350,000bpsd) and Gunvor (110,000bpsd), and both Mobil and Total are International Oil Companies (IOCs) operating in Nigeria in a joint venture with the Nigerian National Petroleum Company (NNPC Ltd).
In Africa, Morocco does not produce oil, but has a 200,000bpsd refinery; same with Zambia with no oil, but has a 12,000bpsd refinery.
Although Egypt is the fifth oil producer, it has nine refineries with 800,000bpsd, being the largest refining capacity on the continent. Algeria, the fourth largest African oil producer has five refineries, refining 671,000bpsd. Libya, the second producer also has five refineries with 380,000bpsd. Angola, the third largest African oil producer has one with refinery capacity of 65,000bpsd.
Niger Republic, Cameroon, Ivory Coast, Ghana and Liberia’s combined oil-producing capacity is less than half of Nigeria’s oil-producing capacity, yet they each have at least an operational refinery.
Dangote’s ‘monopoly’
The accusation often touted by some Nigerians and government officials about Dangote’s monopoly in all his areas of business is not supported by data. In the cement industry, for instance, before the coming on stream of the Dangote Cement, there was Lafarge Holcim.
Lafarge was incorporated on 24th February, 1959, and listed as a publicly quoted company on the Nigerian Stock Exchange on the 17th of February, 1979.
There were also Sokoto Cement, Benue Cement Company (BCC) and Ashaka Cement in Gombe State. All three became moribound at some point and were acquired by BUA, Dangote and Lafarge respectively.
The cement manufacturing sub-sector today has three major players: Dangote Cement, which started manufacturing in 2007, has three fully integrated cement plants of 32.3 metric tonnes per annum (mtpa) located in Obajana, Ibese and Gboko.
BUA Cement is Nigeria’s second-largest cement producer with a current installed capacity of 11 million mtpa.
With plants in Ewekoro and Sagamu in the South-west, Mfamosing in the South-south and Ashaka in the North-east of Nigeria, Lafarge Africa Plc currently has an installed cement production capacity of 10.5mtpa.
Sugar
The data available in the Sugar space also show that there are three major players namely the Flour Mills of Nigeria Plc, owners of Sunti Golden Sugar, BUA Sugar Company, Lafiagi, Kwara State and the Dangote Industries Limited, owners of the Savannah Sugar Company, Numan, Adamawa State.
The Dangote refinery conundrum
The commissioning of the Dangote Refinery by the Buhari administration was greeted with a sigh of relief for most Nigerians, especially given that the government-owned refineries have refused to rise from the dead. The wait for the completion has been “forever” for many Nigerians, in view of the desperate desire to have a solution to the punishing fuel queues that often suffocate the economy, causing untold hardship to citizens, as well as the frequent increases in petrol pump price. The refinery project was first announced in 2013 at an estimated cost of $9 billion. By the time major structural construction began in 2017, the cost had ballooned to about $19.5 billion.
The anxiety shown by Nigerians towards the completion of the refinery was understandable. Analysis by experts suggested that 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.
Reports indicate that the Dangote refinery could earn Nigeria foreign exchange savings of between $25 billion to $30 billion yearly. The impact of such savings would be directly reflected in Nigeria’s foreign exchange reserves by reducing the pressure on the country’s balance of payments.
According to former Central Bank of Nigeria (CBN) governor, Godwin Emefiele, under the current Bola Tinubu administration, Nigeria will cease importation of petroleum products, fertiliser and petrochemicals that drained the country of over $26 billion in 2022, once the Dangote refinery fully comes on stream. He opined further that the refinery will have an enormous impact on job creation by generating thousands of direct jobs, and millions of indirect ones, with over 135,000 permanent jobs for Nigerians. He also stated that the project will generate up to 12,000MW of electricity.
Thus, Nigeria is on the verge of once again being described as a net exporter of refined petroleum products, courtesy of one individual.
Enters the twist
Ahead of the commencement of refining, on December 8, 2023, Aliko Dangote announced receipt of its inaugural one million barrels of Agbami crude grade from the Shell International Trading and Shipping Company Limited (STASCO). The refinery also received four shipments of one million barrels of bonny light crude supplied by the NNPCL.
Not long after, news broke that Dangote had resorted to importing crude from as far as Brazil and the United States, and is also looking to other African countries to source for more feedstock.
The Dangote refinery, according to one of its senior executives, was in talks with Libya to secure crude for the 650,000 barrels per day plant, and was also seeking Angolan oil, to overcome problems with domestic supplies.
That clearly hinted of a major impediment to the operations of the refinery, part of which is largely attributed to suspected sabotage by certain vested interests within the regulatory arm of the Nigerian oil and gas industry.
Since Dangote began operations in January, Weekend Trust gathered that it has been unable to get adequate crude supplies in Nigeria.
READ THE FULL STORY IN DAILY TRUST
