As the Dangote Refinery is set to be inaugurated next week, Nigerians should be clear that it is not a substitute for fuel subsidy. It is not a government project, but a privately driven entity that has been established purely as a business concern that is going to be profit-driven.
Dangote is a private investor, he is going to buy crude from the Federal Government of Nigeria at a Market rate, and he is going to process it the way a typical plant from where we are importing fuel would do it, the fuel that would come out will be sold at market rate and not at subsidised rate. So, it is not expected that Dangote would sell fuel to Nigerians at a subsidies’ rate. This will certainly not happen.
However, if the government wants to continue to sell fuel to Nigerians at subsidized rate, it has to buy from Dangote at market price and sell to Nigerians at subsidized rates
Gains
Instead of waiting for ships to land from overseas countries taking almost 60 days turnaround time, we can just walk around to Lekki processing zone and get fuel from there, this is the advantage. So products supply would be guaranteed and it will be in the neighbourhood.
Again, the transportation cost for fuel would be reduced. Also, it will help Nigeria to conserve foreign exchange. The issue of mother and vessel and perhaps port charges which have been sources of concern for marketers would have been greatly minimized.
Nigeria would save up to US$10bn in foreign exchange (FX) and generate another US$10bn in exports when the facility begins operation
The $19billion project which is the largest single stream refinery in the world with a capacity of 650,000 barrels per day, is put in place with loans taken from banks and other financial institutions and so the promoter of the refinery must pay back the loans.
Nigeria currently imports over 90% of its refined petroleum products, amounting to about US$10bn in import values in 2022. This is further compounded by the value of the country’s petrol subsidies regime, which amount to about US$10bn (N4.4trn) in 2022 and is projected at N3.3trn in the first six months of 2023. The market got a sign of relief arising from an expected commissioning of the Dangote Refinery on May 22, 2023.
There is no doubt that the coming onstream of the refinery will clear the way for subsidy removal, turn Nigeria to petroleum products supply hub where other neighbouring countries get their fuel supply from; boost the growth of associated services and products supply chain partners; and break the monopoly of the NNPCL on product supply.
Meanwhile, analysts say the commissioning would not translate immediately to commercial refining and distribution. Howbeit, it signals the readiness of the refinery to begin operations in the third or fourth quarter of the year.