Nigeria’s President Muhammadu Buhari, in the final days of his presidency, inaugurated Africa’s largest oil refinery on Monday, marking the long-awaited completion of the project.
Located in Lagos, the commercial hub of Nigeria, the refinery is the brainchild of Aliko Dangote, Africa’s wealthiest individual. While the facility is scheduled to commence operations in June, with the first products expected to hit the market in August, some analysts caution that the timeline may be subject to further delays.
Once fully operational, the refinery will possess an impressive capacity to process 650,000 barrels per day, as confirmed by the company. President Buhari, who concludes his eight-year tenure on May 29, hailed the project as a significant milestone and a transformative force for the downstream petroleum products market, not only in Nigeria but throughout Africa.
The commissioning ceremony witnessed the presence of several prominent African leaders, including the presidents of Ghana, Niger, Togo, Senegal, and a representative of Chad’s leader. The refinery is poised to cater to Nigeria’s domestic demand while also catering to global markets, according to Dangote.
Dangote stated, “Once our plant is fully commissioned… we expect that at least 40% of the capacity will be available for export, and this will result in significant foreign exchange entering the country.” For years, Nigeria, known for being Africa’s most populous nation and a major crude producer, has relied on fuel imports due to the underperformance of its state-run refineries.
To meet local demand, Nigeria has been trading its crude oil for billions of dollars’ worth of gasoline, which it then subsidizes for its domestic market. This practice has exerted considerable pressure on foreign exchange reserves, especially amid the COVID-19 pandemic and the Russia-Ukraine conflict, which have caused a decline in oil revenues.
Analysts have differing expectations regarding the refinery’s timeline for full operational capacity. Tunde Leye, an analyst at Lagos-based SBM Intelligence consultancy, believes that it may not reach that point until the end of 2024. Conversely, Amaka Anku, Africa head at Eurasia Group, holds a more optimistic view, suggesting that it typically takes six to nine months to achieve full operations, potentially by the end of this year or early next year.
Both analysts agree that while Dangote’s refinery may not immediately translate into lower petroleum prices, it presents an opportunity for the government to eliminate costly subsidies and address revenue shortfalls. Anku asserts that this is a crucial moment for the government to fulfill its goal of subsidy removal, but acknowledges that a political decision must be made.
Notably absent from the commissioning ceremony was President-elect Bola Tinubu, whose victory in February’s election is currently contested by the opposition. Tinubu has expressed his intention to remove subsidies once he assumes office. The completion of the refinery could also enhance transparency in Nigeria’s oil sector. Anku suggests that as Dangote’s company is publicly listed, it will be required to disclose information about its crude oil purchases and petroleum sales, which would be an improvement over the current opaque system that has fostered corruption.
The sprawling facility, spanning 2,635 hectares (6,500 acres) in the Lekki Free Zone, was initially projected to cost $9 billion. However, the total expenditure to complete the project has surged to $18.5 billion, according to the company. Furthermore, over 1,100 kilometres (about 680 miles) of subsea pipelines have been laid to connect the oil-rich Niger Delta to the complex. These pipelines are expected to serve as a conduit for evacuating trapped gas from offshore platforms and facilitate its monetization.
Adjacent to the refinery is a $2 billion fertilizer plant boasting an annual production capacity of three million tonnes. The Lagos State government anticipates that the project will generate over 100,000 direct and indirect jobs, marking a significant boost to employment opportunities in the region.
