The coming of Dangote Refinery

With the inauguration of the Dangote Refinery by President Muhammadu Buhari today, an important milestone has been attained in the efforts to grow the Nigerian oil and gas industry to its fullest potential.

In many respects, the coming of the refinery is expected to act as a spur in linking up the entire value chain of the oil and gas sector. Such a development will no doubt impact positively on other equally important sectors leading hopefully to a robust all round growth of the Nigerian economy.

By numbers, the Dangote Refinery is a massive project. Built at a cost of 19 billion US Dollars, the refinery is of 650,000 barrel refining capacity, making it the largest in Africa. It is also reportedly the largest single train refinery in the world, designed to integrate all the refining processes for the production of its products in one unit. Thus, unlike other refineries that have separate units for the processing of products like the popular premium motor spirit, PMS, used by majority of vehicles, aviation fuel used by fixed wing and rotating blades aircrafts, the Dangote Refinery uses the latest cutting edge technology in the refining process for its products, thereby minimising production delays and the attendant costs. This helps to ensure reliability of supply and product availability, two factors critical to the successful and profitable running of any refinery.

In terms of employment opportunities, the Dangote Refinery is expected to provide jobs directly and indirectly to about 40,000 persons in the facility and along the value chain of its operations as suppliers, contractors, consultants and the like, all of which will have a positive multiplier effect in other sectors of the Nigerian economy.

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Against this background, it comes as no surprise that industry players are exultant about this development. The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Comrade Festus Osifo, said the organisation “Welcomes the bold move by operators of the Dangote Refinery, as its coming on stream would enhance local production, reduce products importation as well as end the era of uncertainties on petroleum products pricing and evils of subsidy payments’’. Similarly, the International Monetary Fund, IMF, in its statement, projected that the refinery will help Nigeria improve its current account balance. The IMF pointedly said that the ‘‘Refinery has the potential to catalyse more domestic crude oil production and boost gross domestic product (GDP)”.

From the Africa Development Bank, its President, Akinwumi Adesina, described the refinery as the best industrial project on the African continent, which will see an “Acceleration on how to have an outbound on export, value chain development and how to compete regionally and globally’’.

But beyond the positive expectations of the coming of the refinery there are critical issues that have to be considered.

It is envisaged that the refinery will meet the entire demand of the Nigerian market for petroleum products and even beyond. Along the line, it is also expected that the importation of such products at great cost to the country will stop or at least be curtailed. Nigerians also expect that the price of petroleum products now unreasonably high in the country will come down and be affordable.

But we believe that such expectations can only be realised if the sector is fully deregulated. Specifically, the issue of humongous subsidies in which well- connected individuals and their accomplices in government circles skim off huge profits through all kinds of opaque, business unfriendly practices must be decisively stopped forthwith. For years, successive governments in Nigeria have been making promises to stop this practice to no avail. The passage of the Petroleum Industry Act, PIA, which was seen as a very important step in the deregulation of the sector has so far not provided the desired impact regrettably. It makes no sense for a private businessman like Aliko Dangote, the owner of the Dangote Refinery to invest huge amounts of money in such a venture only for it to be run aground by government subsidies to persons who unlike Dangote invested little or nothing in the sector.

Although, we note that the government has a 20 per cent stake in the refinery, which indicates that it will strategically support the initiative by Dangote, we believe that much more needs to be done to fully optimise the potentials that exist in the oil and gas sector. In this regard, Nigerians believe that if the four existing refineries with a combined refining capacity of 450,000 barrels can be refurbished and put to use to complement the 650,000 capacity of the Dangote Refinery, Nigeria can be well on its way to ensuring domestic self-sufficiency of petroleum products at affordable prices, and export the products as well.

All said, we believe Aliko Dangote, the principal investor in the refinery project deserves full commendation for this strategically important investment initiative. We note particularly of all the persons and organisations licensed by the President Obasanjo administration to build refineries in the country, he alone has been able to successfully implement such a project.

While wishing him and the project every success in its take off and subsequent operations, we can only hope that this is not an example of the laissez-faire business structure and practice typical of Nigerian businesses.