$19bn Dangote Refinery: Experts line up expectations, pitfalls ahead commissioning

Analysts have predicted that the $19 billion Dangote Refinery, which is scheduled to be commissioned on May 22, 2023, won’t be the nation’s Uhuru just yet.

The state-owned refineries in Kaduna, Warri, and Port-Harcourt, the most recent of which is more than 31 years old, are on the decline. The Dangote refinery is ramping up in an effort to save them.

According to industrial statistics, the four government-owned refineries in Nigeria have a history marked by abandonment, neglect, inefficiency, and money loss.

The old Port-Harcourt Refinery, which had a capacity of 60,000 barrels per day when it was first put into operation in 1965, the Warri Refining and Petrochemical Company, which had a capacity of 125,000 bpd, the Kaduna Refining and Petrochemical Company, which had a capacity of 110,000 bpd when it was first put into operation in 1980, and the New Port Harcourt, which had a capacity of 150,000 bpd in 1989.

The combined capacity of the four state-owned refineries is 450,000 bpd.

According to a report published on March 6 2022 by the Socio-Economic Rights and Accountability Project, President Muhammadu Buhari’s administration spent $396 million just on maintaining the nation’s refineries between 2015 and 2020.

Millions of Nigerians still require unrestricted access to a complete supply of fuel despite these enormous expenditures.

According to the report, approximately N82.82 billion was reportedly spent in 2015, followed by N78.95 billion in 2016, N604.127 billion in 2017, N426.66 billion in 2019, N218.18 billion in 2019, and N64.534 billion from January to June 2020.

DAILY POST learnt that Buhari, who doubles as the Petroleum Minister, has spent $26.5 billion from the inception of his administration on turnaround maintenance of the four refineries without impact.

Amid the vast spending, Nigerians have continued to suffer from fuel scarcity.

Another consequence is the fuel subsidy arising from the importation of PMS.

Mele Kyari, Group Chief Executive Officer (GCEO) of National Nigerian Petroleum Corporation Limited, said during the official launching of NNPCL in 2021 that Nigeria had continued to spend an average spend N400 billion monthly on subsiding imported fuel products.

According to public data, fuel subsidy payment usually consumes a chunk of Nigeria’s annual budget.

In January, NNPC said the country spent N4.39 trillion on fuel subsidies in 2022. According to the Minister of Finance Budget and National Planning, Nigeria would spend N3 trillion subsidising fuel from January to June 2023. The same amount would likely be expended on fuel subsidies in the next half of the year.

The Minister of Finance, Budget and National Planning, Mr Zainab Ahmed, had hinted at fuel subsidies payment removal by June end; however, she backtracked. The development created confusion in the industry.

However, analysts have said Nigeria’s spending on fuel importation subsidies would be a thing of the past if the Dangote refinery starts operations.

Projected benefits of $19 Dangote Refinery

The National Bureau of Statistics’ Fourth Quarter report of 2022 said Nigeria spent N1.79 trillion on the importation of petrol and diesel; this is coupled with the N4.39 trillion spent on fuel subsidies.

In the first quarter of 2023 alone, Nigeria would spend N3 trillion on fuel subsidies; if the subsidy payment persists, it will spend N4 trillion in the next half of the year.

Experts familiar with the industry said the billions of naira spent on fuel importation and subsidies payment would be saved when the Dangote refinery comes onboard.

A week ago, Aliko Dangote, during an interview with the Economist Magazine, disclosed that the company could save Nigeria $10 billion in foreign exchange (FX) and generate another $10 billion in exports when the facility begins operation.