IT is no more news that the Dangote Group already owns an oil refinery in Lekki, Nigeria, which is expected to have the capacity to process about 6,500 barrels of crude oil per day, when fully operational, making it the largest single-train refinery in the world. In the last two decades, Nigeria, which is an oil-producing country has been a net importer of petroleum, despite spending billions of dollars by successive administrations on several turnaround maintenance exercises, the four refineries failed to produce enough products to meet growing local demand, resulting in the country relying on massive importation to make up for the shortfall. For over 20 years, the local refineries have been dysfunctional, and this has led to a hike in fuel prices, loss of revenue, increase in the unemployment rate, and environmental concerns, among others. The country’s fuel price is not only dependent on global oil prices and exchange rates, but also importation and handling charges make it high. The government has been losing revenue due to the inability to refine crude oil locally.
In 2022, during a conference held by the Atlantic Council, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPCL), Mallam Mele Kyari, said for 20 years, all attempts to fix the refineries failed due to strategy problems. Amidst all of these, one man has confidently taken this responsibility upon himself, broke the long-term jinx, and built a refinery in the country when it could have been somewhere outside Nigeria. Instead of celebrating this great achievement, we keep saying it will make no difference if its fuel prices cannot be cheaper. We think because the refinery is of the soil, it will be fair in its fuel prices. Mr Olufemi Shoneye, the Chief of Corporate Communications for NNPCL, clarified that the global market forces influence the price of petroleum products from any refinery. This project with its immense capacity and strategic importance is set to redefine the economic landscape of Nigeria. It holds the promise of transforming Nigeria from a crude oil exporter to a refined product powerhouse, catalysing industrial growth, and fostering economic stability across the region. The potential benefits are vast, touching every facet of the economy, from the creation of jobs to the stimulation of downstream industries and the conservation of foreign exchange.
The economic impact of the refinery extends more than just fuel production. It is expected to generate thousands of jobs, both directly and indirectly, thus contributing to the reduction of unemployment rates. The ripple effect of this employment generation will invigorate local economics, stimulate growth in ancillary industries, and enhance the livelihood of countless families across Nigeria. In addition to bolstering local employment and economic activity, the refinery’s operations are expected to enhance energy security in Nigeria. With the capacity to produce a substantial volume of petroleum, the country will be better equipped to meet its energy needs and reduce the volatility associated with fuel shortages and price fluctuation. The most notable impact of Dangote Refinery will be the increase in local refinery capacity, which will reduce imports. The refinery is expected to help Nigeria meet 100 percent of its 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 surplus products for the export market. The refined petroleum output from the refinery, in combination with other refineries in Nigeria, is expected to meet the shortfall of the estimated daily consumption of 72 million litres of petrol. The country has faced several fuel shortages in the past, which have caused prices to surge for transport and basic commodities. Recent fuel shortages have been blamed on the Russia-Ukraine war. The price of imported fuel rose more than 100 percent. Importers operated at a loss due to price ceilings set by the government. Besides eliminating import dependency, the Dangote refinery can potentially reduce Nigeria’s crude oil export dependency as more crude oil will be refined domestically. Refining crude oil locally will enable the country to pay for the refined product in naira which will save scarce foreign exchange and generate revenue in exported refined petroleum products. The Central Bank of Nigeria (CBN) says the Dangote Refinery could facilitate foreign exchange savings of between US$25 billion and US$30 billion annually for Nigeria. The establishment of the refinery is also likely to help reduce the cost of production for industries that rely on petroleum products such as diesel to power their operations. In turn, this should increase their competitiveness in the global market, while promoting local industry capabilities.
The refinery could also create an environment for allied industries to emerge in and around it. For instance, businesses in transport, housing and telecommunications will benefit from the construction and operations of the refinery, creating jobs and entrepreneurship opportunities. While under construction, the refinery employed about 40,000 workers – 29,000 Nigerians and 11,000 foreigners. The jobs were in engineering, construction, manufacturing and operations, among other areas. In full operation, the refinery, according to media reports, is expected to create over 250,000 direct and indirect jobs.
I believe this is a fair estimate. However, with the establishment of the Dangote Refinery, there is now the promise of substantial savings as it fills the gap in petroleum product supply. It is estimated that the Dangote Refinery will cater to over 12 percent of Africa’s product demand, potentially reducing petroleum imports across the continent by 36 percent. There could be some potential environmental risks as far as refinery operations are concerned. There could be increased carbon emissions. Refineries are high-risk environments by nature. They handle volatile substances that can lead to disastrous accidents if not carefully and meticulously managed. Fire outbreaks, explosions, and spills are just a few of the hazards that can result from refinery operations, posing significant environmental and public health risks. A primary environmental concern during refinery fires is releasing a toxic mix of air pollutants, including sulfur dioxide, nitrogen oxides, carbon monoxide, particulate matter, and volatile organic compounds. These pollutants can significantly worsen air quality, contribute to acid rain, and cause respiratory issues for people living near the refinery. There are also risks of potential water contamination. Effluent treatment plants are designed to treat wastewater before it evaporates into the environment. A fire at such a facility could also release untreated or partially treated effluents into nearby water bodies, harming aquatic life and seeping.
Despite these itches, the refinery’s capacity to process up to 650,000 barrels of crude oil per day, is projected to meet not only local demand but also to export surplus to neighbouring markets. This shift is expected to conserve up to $10 billion annually in foreign exchange, a substantial impact that could stabilise and strengthen the Nigerian naira.
The Dangote Refinery stands as a significant milestone in Nigeria’s history, deserving our embrace and celebration rather than criticism. While it may not entirely resolve the persistent challenge of fuel pricing that the government has imposed on its citizens, we should acknowledge and celebrate this noteworthy achievement nonetheless.
- Lasisi is a student of Mass Communication Department at the Olabisi Onabanjo University (OOU), Ago Iwoye
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