The Nigerian National Petroleum Company (NNPC) Limited tankers began lifting premium motor spirit (PMS) from Dangote’s giant refinery in Lekki, Lagos, on Tuesday, fueling feelings of Africa’s petrol renaissance.
The $20 billion refinery’s commencement offers a new and potentially more efficient supply route for Nigeria’s petrol needs.
According to Aliko Dangote, president of Dangote Group, the refinery has enough capacity to satisfy the petrol demand of not just Nigeria but the entire sub-Saharan region of Africa.
“The capacity that we have will not only meet up with the Nigerian demand, it will meet up with the demand of sub-Saharan Africa, at least,” he said while addressing the press on Tuesday at the inspection of the 650,000 barrels per day refinery.
He added, “As you know, there’s quite a lot of what you call round-tripping, where people now do documentation and the fuel does not come into Nigeria. So right now, as we have this refinery working, it will show the true consumption of Nigeria. We can track every single loaded truck and we will try as much as possible to track the loaded ships, trucks who can tell you where they are.”
Experts say the refinery will bring the much-needed relief to Nigerians currently experiencing excruciating petrol scarcity in towns and cities nationwide.
“Our PMS can be in filling stations within the next 48 hours, depending on NNPC,” Aliko Dangote said on Tuesday.
He assured Nigerians of high quality of petrol from his refinery, stating that the refinery will help to reduce problems associated with dirty fuel.
“We will offer good petrol while the engines of your vehicles will last longer. You will not be having an engine issue, which a lot of us were having. It won’t happen at all.”
He added, “The quality here will match that of anywhere in the world: US, America. We will make sure that nobody will beat us in terms of quality.”
Refinery to supply 25m litres
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) said Dangote oil refinery would supply a total of 25 million litres of petrol to the Nigerian market daily, starting from September.
NMDPRA disclosed on Tuesday that this would rise to 30 million litres from September.
In a short statement, the NMDPRA said it met with the NNPC Limited to agree on local crude supply to the refinery.
At the NMDPRA headquarters in Abuja, NNPCL reached an agreement to commence crude oil sale and supply to Dangote Refinery in local currency.
“The refinery is now poised to supply an initial 25 million litres of PMS into the domestic market this September. And will subsequently increase this amount to 30 million liters daily from October 2024,” NMDPRA said.
Femi Otedola, a billionaire businessman and chairman of Geregu Power, said the successful operation of the Dangote refinery could lead to a decline in the relevance of local depots, which have traditionally relied on fuel imports to meet domestic demand.
“The depot owners should take heed—it’s time to dismantle those depots and sell them as scraps while the market is still high. The world has changed, and those who do not adapt will be left behind,” Otedola said on his X handle on Tuesday.
Reflecting on their shared history, Otedola recounted the days when he and Dangote formed the Blue Star Consortium, aiming to acquire stakes in the Kaduna and Port Harcourt refineries.
“The days of bowing to foreign powers for our fuel needs are over. You have dealt a death blow to the so-called local cabals who have fattened themselves for years, feeding off our nation’s economic slavery,” Otedola said
He added, “These cabals, who have grown rich by keeping Nigeria in a perpetual state of dependence, must now face the reality that their era of easy gains is coming to an end. I am reminded of the time you revolutionized the cement industry in Nigeria”.
Reduction of logistics costs
Ayodele Oni, senior partner at Bloomfield Law, expressed cautious optimism about the impact of the 650,000 barrels per day refinery on the price of PMS.
According to him, Dangote refinery will resolve the logistics problems facing the petroleum industry today. He also observed that the slash in the cost of importation of PMS would translate into a reduction of the products, albeit other prevailing market realities.
“Refining within Nigeria could lead to some changes in fuel pricing. This is because the reduction in logistics costs eliminating the need for large vessels to transport products—may help lower PMS prices.
“However, it’s important to note that a significant portion of PMS pricing is influenced by the international crude oil market,” Oni said.
European refineries
Dangote’s production is expected to impact billions of dollars of trade in fuel markets regionally and beyond, as Nigeria remains a global demand sink for European fuel, receiving almost 250,000 barrels a day in shipments last year, mostly from Europe, according to data from analytics firm Vortexa Ltd.
For decades, European refiners have enjoyed a lucrative market in Nigeria as an unreliable power supply from the national grid forces companies across Africa’s fourth biggest economy to rely heavily on imported refined products with a net value of $17 billion annually.
Traders and shipping data seen by BusinessDay showed that Nigeria’s new Dangote refinery is ramping up gasoil exports to West Africa, capturing market share from European refiners.
“As much as 300-400,000 barrels per day (bpd) of refining capacity in Europe is at risk of closure because of rising global gasoline production,” Andon Pavlov, an analyst at Kpler, a global trade intelligence platform, said in a note.
NNPC raises prices to N897
According to BusinessDay, the petrol pump prices rose to N897 per litre at various outlets of the NNPC Ltd in Lagos on Tuesday.
The recent development came amid struggles by the nation’s oil company to supply the local market.
Last Sunday, the NNPC said its ability to sustain regular supply of petrol across Nigeria was under threat. The oil company said it was under financial duress due to PMS supply costs, impacting supply sustainability.
In recent months, fuel scarcity hit major cities across Nigeria, with attendant effects on businesses and households.
This also prompted commercial bus drivers to increase their fares in major towns and cities, including the nation’s capital. As a result, black marketers made brisk business selling to willing buyers at higher prices ranging from N1,000 to N1,200.
On Tuesday morning, NNPC Ltd outlets in Lagos adjusted the pump price of petroleum to N897/litre.
Tunde Ayeni, a commercial bus driver at NNPC station, Ikoyi, said: “I have been in the queue since 6 a.m. waiting for them to start selling, but we just realised that the pump price has been changed to N897. This is so terrible and yet they have refused to even start selling the product by now.”
At several other outlets in the Wuse, Lugbe area of the capital city, confirmed that the pump price equally jumped to N897 as motorists and commuters grumbled amid the uncertainty.
In Ikeja, Maryland, Ikorodu, and other parts of Lagos, petrol prices soared to as high as N1,000 per litre on Tuesday, intensifying the struggle for fuel. This trend was also observed in Ogun State and even in the nation’s capital, Abuja.
