Analysis: Five Ways Dangote’s New Petrol Supply Will Benefit Nigerians
After months of setbacks and multiple delays, Dangote Refinery, owned by Africa’s second-richest man, Aliko Dangote, has commenced the delivery of the much-awaited Premium Motor Spirit (PMS), also known as petrol.
Since it began operations in January this year, the 650,000-barrel-capacity refinery, located on the outskirts of Lagos, Nigeria’s economic powerhouse, has faced challenges, including a shortage of crude oil that forced it to import the product to keep the facility running.
“A lot of people did not actually believe that we would be able to deliver, but we did,” Aliko Dangote said during a press briefing on Tuesday, September 3, shortly before petrol tankers began loading the product from the facility.
Petrol, consumed at millions of liters per day, is one of the most desired products derived from crude oil and is expected to help Nigeria’s struggling economy.
As the product is expected to reach fuel stations across the country before the weekend, here are some of the benefits the newly released petrol will add to Nigeria’s economy.
Dangote Refinery Can Meet Domestic Petrol Demand
Nigeria, Africa’s largest holder of crude oil reserves, has been grappling with the challenge of refining its own crude since gaining independence 64 years ago. Despite having three national refineries built decades ago, the country exports its crude and imports refined products at a cost so high that the average Nigerian struggles to afford them.
Petrol, used to power vehicles and generators that produce electricity due to a lack of steady supply, has recently become a scarce commodity, causing price hikes and long queues at fuel stations.
However, that frustrating reality might soon be a thing of the past with Dangote’s petrol.
At full capacity, the 650,000 barrels per day refinery is expected to use at least half of its capacity to process petrol. Although there are conflicting data on how much petrol Nigeria consumes per day, Dangote’s refinery could meet the country’s needs if the facility operates at full capacity and produces over 51 million liters of petrol per day.
The billionaire strongly believes that the refinery will cater not only to Nigeria’s needs but also to those of other African countries.
“The capacity we have will not only meet Nigeria’s demand but will also meet the demand of Sub-Saharan Africa,” he said.
Available Petrol Supply Can Restore Manufacturing and Industry
The introduction of petrol from Dangote’s refinery is expected to have a revitalizing effect on Nigeria’s industrial and manufacturing sectors.
Since the recurring scarcity this year, valuable time has been lost in long queues while businesses heavily reliant on the product, including small businesses like barbers and tailors, struggle to operate due to the inconsistent availability of petrol.
“I do not even have the petrol to power my generator,” a shoemaker in Aba, the industrial hub of Abia State, told Neusroom over the phone.
“Even if you get the petrol, you’ll spend all your earnings on it,” he added, referring to the hike in the price of the product.
Drivers, particularly in Lagos, whose earnings depend on daily commuting of passengers, spend valuable working time in fuel stations.
Also Read: Caught in Lagos Gridlock: My Daily Struggle Navigating NNPC-Induced Fuel Scarcity
Import Substitution and Foreign Exchange Savings
A significant advantage of this new petrol supply is its potential to initiate real import substitution. By producing petrol domestically, Nigeria will reduce its dependence on imported fuel, which has long drained foreign exchange reserves.
“We need to reduce our importation. The importation that takes a significant chunk of our dollar reserves is refined fuel,” Emmanuel Adetayo, a financial analyst, told Neusroom.
“The refined fuel we are talking about includes jet fuel, diesel, and PMS. These three are pivotal to the Nigerian economy,” Adetayo added.
According to data from the National Bureau of Statistics (NBS), petrol, diesel, liquefied petroleum gases, and other gaseous hydrocarbons accounted for 31.84 percent of all imports in the first quarter of 2024. Nigeria imported ₦2.6 trillion worth of petrol and ₦1.2 trillion in diesel during this period.
The importation of these products puts a strain on the naira, which has lost significant value this year and now trades at ₦1,595 per dollar, according to CBN data as of September 3.
Reduction in Inflation and Cost of Living
Petrol, being a vital component in Nigeria’s economy, has considerably contributed to the country’s soaring inflation. Since fuel subsidies were removed by President Bola Tinubu on his first day in office, the price of petrol has increased, now reaching ₦895 in some outlets.
This hike has contributed to the rise in the cost of other commodities, from transportation to food prices. Between August 2023 and July 2024, Nigeria’s headline inflation increased from 25.80 percent to 33.40 percent.
While it remains unclear if Dangote’s petrol will bring down the price of the commodity, the increased availability of the product could help reduce price hikes caused by scarcity.
End of Polypropylene Imports
According to Aliko Dangote, starting in October, Nigeria will no longer need to import polypropylene, a material previously sourced from abroad. This change is significant because it will reduce Nigeria’s reliance on imported polypropylene, which is estimated to be around a quarter of a million tonnes annually.
“There’s a demand for polypropylene in Nigeria. Starting in October, Nigeria will no longer need to import polypropylene, which used to be around a quarter of a million tonnes,” Dangote said.
By producing polypropylene domestically, Nigeria will not only save on import costs but also foster the development of local manufacturing capabilities. This shift will support the growth of related industries and contribute to economic diversification.
Femi Otedola, one of Dangote’s notable business partners and friends, lauded the entrepreneur’s efforts in a recent opinion piece.
“You have not just built a refinery; you have liberated us from the chains of economic dependence that have held this nation back for far too long. The days of bowing to foreign powers for our fuel needs are over, thanks to your vision and determination, Otedola said.
