Nigeria’s $20 billion Dangote oil refinery has commenced the supply of gasoline to the domestic market, a significant step that owner Aliko Dangote claims will end the country’s reliance on costly fuel imports.
The refinery, located on the outskirts of Lagos, has a capacity of 650,000 barrels per day. It began processing naphtha and jet fuel in January and is projected to reach full operational capacity by the end of this year. Analysts suggest that once fully operational, the refinery could disrupt European gasoline exports to Africa.
During a press briefing in Lagos, Dangote emphasized that the refinery’s operations would help reduce Nigeria’s demand for foreign currency. The country has spent billions of dollars on importing petroleum products, contributing to the weakening of the naira. “I think it will give stability to the naira, whereby you remove 40% of the demand for dollars in the market, and that will actually stabilize the market,” Dangote said.
The pressure on the naira, particularly due to gasoline imports, which accounted for 20% of Nigeria’s total imports in the first quarter of 2024, led to a second currency devaluation in February.
President Bola Tinubu has undertaken extensive reforms, including cutting expensive petrol and electricity subsidies and devaluing the naira twice within a year to narrow the gap between the official and parallel market exchange rates.
The International Monetary Fund (IMF) has warned that fuel subsidies could cost Nigeria up to 3% of its GDP this year, as the increases in pump prices have not kept pace with their dollar costs.
Nigeria’s downstream petroleum products regulator announced that the refinery would initially supply 25 million liters of gasoline daily to the domestic market this month, with plans to increase this to 30 million liters daily by October.
Following this development, the state oil firm NNPC raised the price of petrol from an average of 617 naira ($0.39) per liter to 855 naira, according to new prices displayed at its fuel stations in Abuja and Lagos. The NNPC spokesperson declined to comment on the price changes.
The revised gasoline price is expected to reduce the subsidies Nigeria pays to keep pump prices low.
Gasoline from the Dangote refinery is anticipated to alleviate the ongoing fuel shortages in Nigeria, where queues at fuel stations have persisted since July. However, the refinery’s success will depend on its ability to secure a steady supply of crude oil, an issue that has been a point of contention with the regulator.
The Nigerian government has indicated that it will sell crude to the refinery in local currency to ensure a consistent supply of feedstock.