Nigeria’s state oil firm NNPC Ltd will supply the new 650,000 barrel-per-day Dangote oil refinery with up to six cargoes of crude oil in December to be used in test runs, three industry sources with knowledge of the matter said.

The refinery, funded by Africa’s richest man Aliko Dangote, will transform oil trading in the Atlantic Basin and remove a lucrative outlet for fuels produced in Europe and the United States that have for years powered the cars, trucks and generators on the continent.

The refinery is in the Lekki free trade zone near Lagos. Once it is fully up and running, it will turn oil powerhouse Nigeria into a net exporter of fuels, a long-sought goal for the OPEC member that is currently almost totally reliant on imports.

According to Reuters, one of the sources, an NNPC official, who declined to be named, specified six cargoes, or 200,000 bpd, would be supplied in December as part of a one-year deal, adding that volumes in future months would be supplied “based on mutual agreement and availability”.

The other sources said about 4-5 cargoes, or at least 130,000 bpd, were planned. A Dangote Group official, who did not wish to be named, said “some of the agreements have confidentiality clauses” without elaborating when asked about the NNPC supply deal.

NNPC has a 20% stake in the refinery.

The refinery began the commissioning process in May this year after running years behind schedule at a cost of $19 billion, above initial estimates of $12-14 billion.

Commissioning includes testing the different units that make products from gasoline to diesel and making sure they respond to the control panels.

President Muhammadu Buhari had commissioned the Dangote Petroleum Refinery and Petrochemical Plant in Lagos in May 2023

This is the country’s first privately owned crude oil refinery in Nigeria, and the world’s largest single-train refinery.

The president’s visit comes exactly one week before the end of his second term as leader of Africa’s most populous country. It also comes 45 years after he – as federal commissioner of petroleum resources – completed and commissioned the state-owned 100,000 barrels per day Warri Refinery in Nigeria’s Niger-Delta.

The Dangote Refinery has a capacity of 650,000 barrels per day of crude oil and 900,000 metric tons of polypropylene in a single-train. The single-train system allows for one integrated distillery system that can produce a variety of products.

“We have selected the best plants and equipment and the latest technology from across the world,” Aliko Dangote, the president of Dangote Industries, said during his welcome address.

Foray into refinery

Dangote’s initial foray into the refinery business began in 2007 during the final days of former President Olusegun Obasanjo’s administration. At the time, Dangote led a consortium to buy majority stakes in the Port Harcourt and Kaduna refineries, a deal critics said was wrapped with cronyism.

Obasanjo’s successor, the late Umar Yar’Adua, reversed the sale and returned the refineries to government control.

Dangote said that incident propelled his group to rethink their market entry strategy and business model.

 “We subsequently committed to enter the market boldly with a vision to invest in a green field refinery that will transform the industry in Nigeria and Africa as a whole.

The facility we are commissioning today is aimed to reposition Nigeria as a key player in the downstream petroleum sector of the global market,” said Dangote.

The investment, valued at $18.5bn, was prompted by a desire to support and contribute to the federal government’s effort to transform the economy and position Nigeria as a leading oil exporter in Africa , said Dangote.

“It is our firm commitment that we will replicate in [oil and gas] what we have achieved in the cement and fertiliser markets, where Nigeria transited from being the largest importer of these two products to a net exporter,” said Dangote.

Our first product will be in the market before the end of July, the beginning of August this year

“Beyond today’s ceremony, our first goal is to ramp up production of the various projections to ensure that within this year we can fully satisfy our nation’s demand for higher quality products to enable us to eliminate the tragedy of import dependency and stop, once and for all, dumping in our market substandard products.

 “Our first product will be in the market before the end of July, beginning of August this year,” he said.

Mele Kyari, head of the Nigerian National Petroleum Corporation Limited (NNPC), said the vision behind the refinery and the optimism it generates for a better future is very exciting.

“We will continue to work with investors to develop the hydrocarbon assets using the most modern and innovative technologies to realize the potentials of our resources and power the transition towards clean energy in the decades ahead,” he said.

CBN’s support

“I’m delighted to announce that the commercial loan component of the project was financed majorly by our domestic banks, with the balance sourced from foreign banks,” said Godwin Emefiele, the Central Bank Governor.

Around half of the project was financed through equity investment by Dangote. The rest came in the form of debt finance from Nigerian and international banks.

 “The Central Bank of Nigeria also partnered with Dangote in ensuring the successful completion of this project by providing over N125bn to cover domestic currency requirements for the venture, while also ensuring the availability of foreign exchange to pay for the importation of some of the plants and machinery being commissioned today,” said Emefiele.

“As of today, total outstanding loans have dropped from over $9bn when this project started to $2.7bn. This reflects the astute credit worthiness and commercial capability of the group and its chairman, Aliko Dangote.”

Milestone for Nigeria

In his speech, Buhari described the Dangote Refinery as a notable milestone for Nigeria’s economy and a game changer for the downstream petroleum product market in Africa.

“Our economy, which has been stressed for many decades by huge deficits in economic infrastructure and over a decade of insurgency, has also been severely impacted by several external crises including the global financial crisis, the collapse of oil prices, the coronavirus pandemic, and the Russia-Ukraine war,” said the president.

We must create the necessary conditions for our private sector to grow and partner with the public sector

“The consequences of these challenges constitute a severe strain on our economy, limiting the government’s ability to provide basic infrastructure without resorting to huge borrowings.

 “Our government therefore decided to focus attention on creating an enabling environment for the private sector to thrive and fill the enormous gap in investment not only in infrastructure, but also in critical sectors.

“We recognize that without active participation of the private sector and a strong commitment to public-private partnership, our economy will continue to remain severely challenged and our economic growth impeded.”

With additional report from Olusola Bello