In September 2013, Nigerian businessman Aliko Dangote unveiled plans to build a refinery with a capacity to process 650,000 barrels of crude per day. The plan also includes petrochemicals, fertilizers, and power generation facilities, making it a cornerstone of Nigeria’s industrial ambitions, eventually costing 19 billion dollars. If successful, this refinery will be the largest single-train refinery in the world and come with 135,000 jobs.
In September 2024, the Dangote Oil Refinery began processing gasoline, marking a significant development after delays caused by crude shortages. The refinery started operations in January, producing naphtha and jet fuel. However, it has not been able to produce gasoline until now.
The Dangote Refinery represents a significant opportunity to address Nigeria’s long-standing challenge. Despite being the world’s seventh largest producer of crude oil, Nigeria imports over 90% of its refined fuel due to the poor state of government-owned refineries. Significantly reducing Nigeria’s dependency on imported fuel could help stabilize local fuel prices, reduce foreign exchange demand, and improve the balance of trade. It is estimated that the refinery could save Nigeria up to $10 billion annually in fuel import costs and generate an additional $10 billion in exports.
The refinery also has the potential to make Nigeria a hub for petroleum products in West Africa, serving neighboring countries that similarly struggle with refining capacity. For the broader economy, this could mean more jobs, improved infrastructure, and the opportunity to develop related industries, such as petrochemicals and plastics.
One key expected benefit of the Dangote refinery is its ability to stabilize domestic fuel supply and prices. By processing oil locally, Nigeria would no longer be subject to the volatility of international refined oil markets and shipping costs. However, it’s important to highlight that the refinery will sell its products at market prices. While this could mean reduced transportation costs and supply stability, it may not necessarily translate into lower fuel prices for Nigerian consumers, particularly in the absence of government subsidies. Additionally, if global oil prices rise, local fuel prices could still be affected despite local refining.
The other key benefit is the export potential of the refinery, as this presents an opportunity to generate revenue. This could improve Nigeria’s balance of payments and help stabilize its desperately falling Naira value. However, there is a risk it could also lead to tensions if a significant portion of the refinery’s output is exported rather than being used to meet domestic needs.
The Dangote Refinery is undeniably ambitious, and its completion could mark a turning point for Nigeria’s oil industry. It can potentially reduce the country’s dependence on fuel imports, stabilize local prices, and create a new export revenue stream. If executed well, it could drive economic growth, reduce fuel shortages, and position Nigeria as a regional energy powerhouse. For now, the Dangote Refinery remains a project to continue to watch closely.