• Buhari, Akufo-Addo, others hail facility as game changer
• 70% of loans already paid, says Emefiele
• Dangote: Project would have failed without CBN
• 40% of products available for export
• Be transparent in your deal with Dangote Refinery, CTA tells FG
The much-awaited Dangote Refinery was commissioned yesterday by President Muhammadu Buhari, promising a shift in the country’s energy economics as well as export-import relations. With an investment of $18.5 billion, the refinery is expected to revolutionise Nigeria’s economy and alter the course of history.
Following the grounding of the state-owned oil refineries, the country has relied on imported petroleum products, with the government subsidising the cost of virtually all the products until recent years when automotive gas oil (also known as diesel) and others were liberalised.
Premium motor spirit (PMS) pricing and distribution have remained within state regulation and the cost is largely subsidised. The extremely controversial PMS subsidy is a major drain on the Federal Government’s revenue with Nigerian National Petroleum Corporation (NNPC) Limited, a cash cow of the country, remitting zero or near-zero revenue to the Federation Account in recent months.
The push-and-pull narrative around premium motor spirit (PMS) subsidy has remained a major feature of the polity for decades. But the outgoing administration had signed the Petroleum Industry Act (PIA), which provisions for PMS subsidy removal and other reforms. Its full implementation, especially in subsidy management, was deferred till June 1, 2023, when the President-elect, Bola Tinubu, would have assumed leadership.
For the first half of the year, N3.36 trillion is earmarked for subsidy payment. Dangote facility operation might be a direct solution to the subsidy quagmire but experts said it would, at least, ease the pressure on foreign exchange challenge – a crisis neatly weaved into the country’s huge import needs.
The installed capacity of the refining facility is 650,000 barrels per day (BPD). But Nigeria’s consumption needs are estimated at 450,000 BPD, which is about 30 per cent less than what the refinery is bringing to the market.
Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, had described the refinery as a major game changer in the country’s FX shortage. When the facility starts producing, he said, Nigeria would move from an importer of petroleum products to a net exporter.
The refinery, which is located in Lekki, Lagos state, can process 650,000 barrels of crude oil per day and produce a range of refined petroleum products, including gasoline, diesel, aviation fuel, and liquefied petroleum gas.
This will significantly reduce Nigeria’s dependence on imported fuel products and save the country billions of dollars in foreign exchange earnings.
President Buhari told Nigerians yesterday that the production capacity would enable the country to achieve self-sufficiency in refined products, with some surplus for exports, a milestone for the economy.
Buhari acknowledged that Nigeria’s economy had faced significant challenges over the years, including infrastructure deficit, insurgency and external shocks from the global financial crisis, oil price collapses, the COVID-19 pandemic and the Russia-Ukraine war.
“The consequences of these challenges constitute severe strain on our economy limiting the government’s ability to provide basic infrastructure without resorting to huge borrowing,” he said.
He applauded the founder of the Dangote Group, Aliko Dangote for his commitment to transforming the country’s economy, adding that the active participation of the private sector, and a strong commitment to public-private partnership (PPP) have aided the economic growth.
Buhari was hopeful that the incoming administration would continue to apply such innovative skills in partnership with private sectors to accelerate the provision of critical infrastructure.
He said: ‘‘I am confident that my successor, His Excellency, Asiwaju Bola Ahmed Tinubu, will sustain the improvement in our economic and business environment and strengthen the framework of our public-private partnership policies to accelerate the pace of our economic growth and development.”
He stressed the need for African countries to come together, integrate their economies, eliminate trade barriers and rally their populations to achieve Agenda 2063 for the continent’s prosperity.
“I urge and encourage our other great entrepreneurs to emulate this iconic Nigerian industrialist and join the government in accelerating our growth to realise our country’s globally-recognized economic potential.
“We must create necessary conditions for our private sector to grow and partner with the public sector to accelerate economic growth across the continent. We must not allow outside powers to use some of our leaders to destabilise our economic and political trajectory,” he said.
The President-elect, who was represented by the incoming Vice President-elect, Kashim Shettima, said the refinery would make a huge impact on the growth and development of the economy, positively influencing the well-being of Nigerians.
“The incoming administration will do whatever possible to upscale and sustain the project,” Tinubu promised, commending Dangote for his resilience toward the success of the project.
President Nana Akufo-Addo of Ghana; his Nigerien counterpart, Mohammed Bazoum and Senegalese President, Macky Sall also commended the entrepreneurial exploit of Aliko Dangote, the promoter of the Refinery and Africa’s richest man, saying he has demonstrated the can-do spirit of Africa and charted the sustainable pathway for African rising.
Emefiele, who recalled that at the conception of the project in 2013, it would cost about $9 billion but that the figure rose with the project completed with a total of $18.5 billion with a contribution of 50 per cent equity investment by Dangote and 50 per cent funding from banks.
He also commended Dangote Group for its tenacity and unwavering commitment to completing the project, notwithstanding various challenges and constraints that they encountered along the way.
He expressed appreciation to all the participating local Nigerian banks that provided immense support and exceptional understanding. He disclosed that Dangote Group had started repaying some of the commercial loans before the inauguration of the facility, even as he disclosed that the outstanding debt had dropped from over $9 billion to $2.7 billion.
“I am proud to state that the commercial loan component of the project was financed majorly by our domestic banks, with the balance sourced from foreign banks,” Emefiele.
Emefiele further said, in ensuring the successful completion of the project, CBN provided over N125 billion to cover the domestic currency requirements of the venture while also ensuring the availability of foreign exchange to pay for the importation of some of the machinery being commissioned.
He projected that the Dangote Refinery could earn Nigeria foreign exchange savings of between $25 billion and $30 billion yearly, stressing that the impact of the savings would be directly reflected in Nigeria’s foreign exchange reserves by reducing the pressure on the country’s balance of payments.
Given the processing capacity of 650,000 barrels per day (BPD), the CBN Governor said 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 will be available for export.
According to him, the refinery is designed to process not only the Bonny Light grade of crude oil, but also process a wide variety of other crude streams, including many from Africa, some Middle Eastern streams, and the US Light Tight oil.
He also said the Dangote refinery is equally capable of delivering all types of liquid products, including gasoline, diesel, kerosene, and aviation jet fuel.
Emefiele pledged that CBN, through its various development finance interventions, would continue to support critical sectors of the Nigerian economy to promote a homegrown rebalancing of the economy and foster self-sufficiency.
The Centre for Transparency Advocacy (CTA) has called on the Federal Government to take proactive steps to ensure utmost transparency in its participation in the Dangote Refinery project.
According to CTA, the administration of the President-elect should prioritise measures that would ensure that the transaction benefits all Nigerians, instead of perpetuating what it described as the historical trend of a select few benefiting from the petroleum sector.
In a statement yesterday, the Executive Director of CTA, Faith Nwadishi, who noted that the Dangote Refinery project holds immense potential for Nigeria’s energy sector, said that it will offer increased refining capacity and reduced reliance on imported petroleum products. However, she said it was imperative that the incoming government makes concerted efforts to revive the existing four refineries in the country.
“In the interest of transparency and accountability, the Centre for Transparency Advocacy seeks clarity from the government on a few crucial questions. With a 20 per cent equity share for the Dangote Refinery and the supply of 300,000 barrels of crude to the refinery, what are the plans to ensure Nigerian interests are adequately represented and protected? Will subsidy be paid on the products supplied from the Dangote Refinery? Clear answers to these questions and a well-defined plan on the removal of subsidy will ensure transparency in the country’s dealings with the privately owned refinery and instill confidence among the Nigerian people.
“The government must provide clear answers and a comprehensive plan to address concerns regarding Nigerian interests and subsidy payments for the products supplied by the refinery. This will foster transparency, build trust, and ensure that the benefits are equitably shared among all Nigerians.”
Meanwhile, the project is completely off the grid and supported by a 435 megawatt (MW) independent power plant (IPP) – enough to power the five states under the Ibadan electricity distribution company (IBEDC), which are Ogun, Osun, Oyo, Kwara and some part of Ekiti.
The Dangote Refinery IPP is about 15 per cent of the average power generated on the national grid.
Dangote, who said the investment would have stalled without the CBN’s timely intervention, disclosed that the huge investment was prompted by his desire to support and contribute to Nigeria by transforming the economy and properly positioning the country as a leading nation in Africa.
According to him, the plant will meet 100 per cent of the Nigerian consumption need of all refined products (gasoline, 53 million litres per day; diesel, 34 million litres per day; kerosene, 10 million litres per day, and aviation jet, two million litres per day) and has a surplus of each of these products for export.
He disclosed that 80 per cent of the production can also be discharged through trucks across the country with the first production of the refinery made available by August 2023.
Dangote revealed that once the plant is fully on stream, at least 40 per cent of the capacity will be available for exports, resulting in significant FX.
Speaking on the benefits of the refinery to the country, he said: “The refinery will make available vital raw materials for a wide range of manufacturers in the plastic, pharmaceuticals, food and beverages, construction and other industries with massive job opportunities.”
He further stated that the refinery’s operation and related businesses would generate a substantial number of job opportunities, while the downstream supply and distribution of its products would significantly contribute to the absorption of labor, potentially benefiting hundreds of thousands of individuals.
He pledged that the sector would be replicated with the achievement in the cement and fertilizer market, ensuring that it is run at the highest capacity and efficiency to enable competitive export to other markets, especially in wider regions where 53 out of 55 countries are dependent on imports to meet their petroleum product demand.
Also speaking, the Managing Director of NNPC Limited, Mele Kyari, said the inauguration of the plant provided the potential for domestic security in the country, and assured that the company would continue to support investments in domestic refining to satisfy growing demands.
It has been estimated that the refinery would add about $21 billion (N9.7 trillion at the current exchange rate) yearly to the Nigerian economy.
The facility has 177 tanks with a 4.742 billion-litre capacity, while the temporary housing units on the premises could shelter 33,000 persons.
Sitting on 2,635 hectares of land located in Dangote Industries Free Zone in Ibeju-Lekki, and will employ over 100,000 persons.