S&P: In Spite of Multiple Delays, Dangote Refinery Vital to Nigerian Economy

Emmanuel Addeh in Abuja

S&P Global has said that despite many delays, the recent partial commencement of operations by Dangote refinery remains very critical to the growth of the Nigerian economy.

In an update on Nigeria, S&P also said the massive Dangote oil refinery, from its analysis, may not achieve full complement of its operations until somewhere around the middle of 2025.

The global firm, which provides financial market research and intelligence, stated that the introduction of the Dangote refinery in Lagos can help Nigeria fulfil its potential by reducing a debilitating dependence on foreign refineries.

Nigeria is Africa’s top oil producer, but the report added that the country is forced to export almost all its crude because state-owned refineries have been shut down for repairs.

The Dangote refinery, with a capacity of 650,000 bpd, it said, should help to end Nigeria’s dependence on the cycle of crude exports and petrol imports when it begins to operate in full.

What makes the plant even more sophisticated, S&P said, is that the Dangote crude distillation unit was designed to process 12 crudes simultaneously and is optimised for Nigerian crude grades.

“Aliko Dangote, Africa’s richest man, announced plans for the Dangote refinery in 2013. The original production cost was projected to be $9 billion, but the project ended up costing over $19 billion and suffering repeated delays.

“On May 22, 2023, former Nigerian President Muhammadu Buhari inaugurated the refinery. Despite the launch, the refinery did not produce any oil products due to a lack of domestic crude feedstock. Finally, on December 7, 2023, a crude oil tanker called OTIS unloaded 950,000 barrels of Nigerian Agbami crude at Dangote’s offshore crude receiving terminal.

“In the same month, privately owned Nigerian National Petroleum Company Limited (NNPC), which owns a 20 per cent stake in the refinery, agreed to supply 6 million barrels of crude oil as feedstock.

“While Aliko Dangote celebrated these deliveries in public statements, S&P Global analysts does not expect that the refinery will reach full operating capacity until mid-2025, with further delays still possible,” the update added.

It explained that recent Nigerian economic data points to continued headwinds for the private sector, explaining that a renewed downturn in the fourth quarter of 2023 halted a period of recovery following the cash crisis at the start of the year.

“Demand is waning, and a survey of firms in June 2023 attributed higher prices to fuel costs. Reports of higher fuel prices remained well above average levels into the final quarter of 2023. S&P Global Market Intelligence forecasts that consumer price inflation in Nigeria will average 24.3 per cent in 2023 and remain elevated at 18.5 per cent in 2024.

“There is a saying about Brazil, that it is ‘the country of the future and always will be.’ This wry observation reflects the struggle of certain resource-rich developing nations to realise their tremendous potential.

“Perhaps the introduction of the Dangote refinery in Lagos can help Nigeria fulfil its potential by reducing a debilitating dependence on foreign refineries,” the update stated.