2 February 2024

The Dangote refinery, near Lagos, Nigeria, May 22, 2023.

A week before the end of his mandate, the outgoing president of Nigeria offered himself, Monday, May 22, a ceremony with great fanfare for the inauguration of the megarefinery of the Dangote group, in the free zone of Lekki, on the outskirts from Lagos, the economic capital of the country.

“This complex, which has the capacity to refine 650,000 barrels of oil per day, should allow our country to achieve self-sufficiency in fuel and even have surpluses for export”, Muhammadu Buhari said before an impressive audience of dignitaries – governors, kings, top brass, diplomats and representatives of the oil sector from all over Africa. Several Heads of State from the sub-region also made the trip to personally congratulate the leader and billionaire Aliko Dangote, at the origin of this titanic project.

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At the podium, the richest man on the continent promised them to “reproduce what (the Dangote group) has already achieved in the cement and fertilizer market, transforming Nigeria from importer to net exporter”. The commissioning of the largest single-train refinery (use of a single crude distillation unit) in the world is indeed supposed to put an end to a cruel paradox: Nigeria may be the sixth largest producer of crude in the world. , it is forced to import almost all of its fuel, since none of its four refineries are functional.

Insecurity and large-scale oil theft in the Niger Delta have further led to the erosion of oil production and the collapse of foreign exchange reserves. Nigerians therefore regularly suffer from serious shortages of gasoline, while the country struggles to supply itself with fuel.

A symbolic inauguration

At full capacity, the Lekki refinery should not only produce gasoline, but also diesel, kerosene and aviation fuel, in sufficient quantity to cover Nigeria’s total consumption of refined products, which is around 450 000 barrels per day according to specialists. Ultimately, Aliko Dangote therefore wishes “export the surplus competitively to other markets, especially within the Economic Community of West African States, and more broadly throughout the continent”.

The plant’s proximity to the new deep-water port in the Lekki Free Zone should allow the refinery to be supplied with crude oil from the Niger Delta, but also to quickly load the refined product onto ships for shipment. abroad. A good part of the production could also be transported on board thousands of trucks to the four corners of Nigeria, according to the forecasts of the Dangote group – which does not seem to be worried about the congestion of the axis Lekki-Epe which serves the refinery. , located on the outskirts of Lagos.

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These spectacular declarations have indeed a hard time dispelling the doubts of local observers. Work on the refinery – the project for which was sketched out in 2013 – took a lot of delays and its construction cost exploded, reaching nearly 19 billion dollars (17.7 billion euros), well within beyond the initial forecasts, set at 9 billion dollars. Finally, the May 22 inauguration is above all symbolic, since the refinery will not begin operations immediately.

“No one expected it to start working on day one, tempers Taiwo Oyedele, analyst at PwC in Lagos. It was above all a question of organizing this ceremony before Buhari left power, so that the project would be put to his credit. » In his speech, Aliko Dangote assured that the production will come to the market “by the end of July-beginning of August”, without further details. For its part, the National Oil Company of Nigeria (NNPC) has pledged to immediately supply 300,000 barrels per day to the refinery, even if“there is little chance that it will be able to handle so many barrels at the moment”according to Taiwo Oyedele.

“A progressive production trajectory”

While Dangote Group is talking about full commissioning at the end of 2024, the teams of the International Monetary Fund (IMF) are instead considering “a gradual production trajectory: 100,000 barrels per day in 2024, 200,000 barrels per day in 2025, rising to 300,000 barrels per day in 2026-2027”. Far from the 650,000 barrels evoked at will throughout the inauguration ceremony.

The agreement between the NNPC and the Dangote group is also questionable. In 2021, the Nigerian government allowed the national oil company to acquire a 20% stake in the Lekki refinery for $2.76 billion. But the idea that a public company is impoverished to enhance a private company is not unanimous in Nigeria. “This is not a government project, and I find it odd that a country’s government should put its energy future and investments in the hands of one man”squeals Dauda Garuba, an independent researcher based in Abuja.

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And even if Dangote emphasizes the local market in its communication, “there is no known agreement at this stage that foresees that a percentage of the production will be reserved for the Nigerian market”underlines Ese Gladys Osawmonyi, analyst within the cabinet SBM Intelligence, in Lagos. “The costs have tripled, there is a big pressure on the schedule and therefore a need to make profits. This could go through exports ”, she warns.

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In its report published in February, the IMF also noted that “the impact (…) will mainly materialize in savings on the cost of transport, because the fall in imports will be offset to a large extent by the reduction in exports of crude, since the refinery would have to supply itself locally”. The Nigerian government will have to pay for Dangote’s refined oil in dollars anyway… “As a result, if he sells everything on the spot, that will not really solve the problem of foreign trade and the supply of foreign currencies”sighs a good connoisseur of the Nigerian oil sector.

End of state subsidies?

Although critical, he nevertheless believes that the refinery could be an important vector of jobs when it begins its operations – the Dangote group is already counting on the creation of one hundred thousand direct and indirect jobs. Its commissioning could above all allow the Nigerian government to lift once and for all its enormous subsidies for gasoline imports.

Over the years, these have given rise to a large lobby of gasoline import traders who have worked to ruin public refineries, which produced gasoline that was more expensive than imported gasoline. So that the Dangote refinery does not meet the same fate on the local market, the Nigerian government will probably be forced to subsidize the purchase of its production. Unless he puts a definitive end to the subsidies.

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Aliko Dangote’s political influence is such that he may well be the only one capable of putting an end to this system which feeds corruption and drains public coffers. “It is very, very difficult for the state to continue paying 400 billion naira (some 800 million euros) grant every month », NNPC Director Mele Kyari recalled on Monday.

“The removal of subsidies will obviously create a huge shock for the population. But if we allow refineries to be profitable, it could lead to the creation of a more coherent economic model., indicates the same source within the oil industry.

Several local projects have emerged in the wake of the Lekki refinery and with the prospect of an upcoming lifting of subsidies. The French group Axens and the Nigerian group BUA notably signed an agreement for the construction of a refinery in the state of Akwa Ibom, while the Nigerian government signed agreements with the Korean Daewoo for the rehabilitation of its refineries in Warri and Kaduna.

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