ANALYSIS: How Dangote refinery is shaping Nigeria’s energy sovereignty
The refinery, which is located in Lagos, can refine up to 650,000 barrels per day (bpd) and began production in January. Reuters called it the biggest in Africa, in like manner adding that when the refinery arrives at its full limit it will likewise turn into the largest on African and European soil.
Bloomberg reports that the capacity of the Dangote refinery is greater than that of all ten top European refineries. 650,000 barrels of petroleum products are refined at the plant each day. As a result, it surpasses Shell’s Rotterdam-based Pernis refinery. The largest in Europe, Pernis processing plant has a current limit of 404,000 bpd.
The Dangote refinery is expected to feed Nigeria’s energy and fuel needs, leaving the country with surplus supplies that it can even export fuels across West Africa.
The Dangote Refinery makes Nigeria the largest energy producer in Africa. Even so, most of the country’s fuel consumption is still imported. This makes Nigeria the biggest import market for petrol in Africa. The country ships in more than 80 percent of its petroleum products. It exports crude oil to be refined and then imports it back for sale.
The refinery is touted by many as a probable energy hub that could bring a stop to decades of gasoline business from Europe to Africa.
West Africa has for years been the major outlet for gasoline. About a third of Europe’s 1.33 million bpd average gasoline exports in 2023 proceeded to West Africa, with the bulk of those exports going to Nigeria, a Kpler data shows.
The Central Bank of Nigeria (CBN) reports that the cost of importing petroleum products into Nigeria—including freight—doubled over a five-year period, rising to US$23.3 billion by the end of 2022 from US$8.4 billion in 2017. This represents an annual average of US$11.1 billion.
The CBN added that if Nigeria continues to rely on petroleum imports, the country’s annual import costs could reach $30 billion by 2027. With the Dangote refinery, this trend can now be slowed down.
According to shipping data and traders, the refinery is expanding its gasoil exports to West Africa, taking market share from European refiners.
A European distillates trading source said that the refinery “changed the balances in West Africa,” affecting European markets, according to Reuters post.
The Kpler data revealed in May that EU and UK gasoil exports to West Africa sank to 29,000 bpd– a 4-year low; while Russian exports also reached an eight-month low of 87,000 bpd.
The refinery, which was commissioned in 2023 and built by Nigerian business mogul and richest man in Africa, Aliko Dangote, will bring an end to the country’s fuel shortfalls that have continued for almost a decade, and would boost economic growth.
The refinery will also deliver employment for Nigerians. During the refinery’s structure, roughly 40,000 people were employed. When fully functional, the refinery is predicted to yield more than 250,000 jobs.
Nigeria is currently confronting a multifaceted energy situation, as gas and energy costs have risen high. This comes as the nation finds itself fighting fuel shortages.
Prices of fuels and diesels have gone up. Fuels in most outlets sell at an average of N900 per litre. Aliko Dangote, has said his refinery will reduce fuel prices in Nigeria when operations fully begin. The Dangote refinery has started the sale of diesel into the Nigerian market, and in less than a month, it crashed the pump cost of the diesel from N1,600 to N940.
Nigeria’s energy sovereignty
With the refinery, Nigeria is poised to become more self-reliant by processing its crude oil. The Dangote refinery is predicted to aid Nigeria in meeting all of its provisions for refined petroleum products (72 million liters of gasoline per day; 34 million gallons of diesel per day; kerosene, 10 million liters per day, and aviation jet, 2 million liters per day), as well as surplus goods for export.
The Nigerian Central Bank also posited that the Dangote refinery has the potential to help save Nigeria around $25 billion and $30 billion yearly in foreign exchange.
In addition to bolstering Nigeria’s inner ability to oversee its energy needs, the refinery exemplifies the need to maintain a balance between pursuing energy liberation and ensuring environmental sustainability.
Alignment with global climate goals
Nigeria’s energy decisions have a significant effect on the goals for the global climate. The country’s switch to cleaner energy sources is crucial for attaining global climate goals, such as those summarized in the Paris Agreement.
By simplifying domestic refining methods, the Dangote Refinery could help decrease the carbon footprint of fuel imports and transportation. This emerges as a step toward aligning Nigeria’s energy sector with broader climate goals in emission reduction.
However, Nigeria’s energy methodology is likewise addressed by the refinery’s dependence on fossil fuels. The worldwide push for a change to environmentally friendly renewable energy sources conflicts with dependence on fossil fuels, even though it might offer momentary advantages as far as diminishing emissions related to imports. The difficulty lies in finding some kind of harmony between the pressing requirement for climate-resilient and sustainable energy solutions and the rapid advantages to the economy.
Environmental costs
Despite the significant economic benefits of the refinery project, the environmental impact is a significant challenge. The massive facility’s potential effects on Nigeria’s environment cannot be ignored.
The operation of Dangote refinery raises concerns about its potential impact on the Nigerian community. The extraction of fossil fuels has a negative effect. Communities and the population are affected as a result of oil spills and gas leaks, resulting in air pollution and adverse health effects. These issues not only compromise climate resilience but also put public health at risk.
When operating a refinery of this size, it is impossible to avoid producing a lot of carbon emissions. There are a lot of greenhouse gasses discharged during the refining procedure, which could hurt Nigeria’s already large carbon footprint.
“To reduce the refinery’s emissions and impact on the environment, strict environmental controls must be implemented,” Adeyanju Bidemi, an energy expert, told the reporter.
Bidemi also stressed the significance of employing environmentally and socially responsible strategies to lessen the negative effects of refinery operations. Local communities’ safety and well-being must be ensured, and environmental regulations must be strictly enforced.
Bidemi stated, “It is crucial to communicate with local stakeholders transparently about the refinery’s environmental impact and benefits. Concerns can be addressed and collaborative approaches to reducing negative outcomes can be developed through community involvement.”
Policy implications and future directions
The Dangote Refinery marks an important turning point in Nigeria’s energy policy. It presents significant strides in conforming to global climate goals, and it also presents significant opportunities for enhancing energy sovereignty and propelling economic expansion.
The development of the refinery also emphasizes the significance of transparent environmental impact monitoring and reporting. To ensure that the refinery’s operations comply with Nigeria’s climate commitments and add positively to sustainable development, adequate regulation and supervision are needed.
“Alongside the project, Nigeria should look at accelerating investments, and making sure effective regulations are available,” advised David Chinedu, an energy analyst. “This approach can help balance the immediate benefits of projects like the Dangote Refinery.”
“Nigeria can use the Dangote Refinery’s economic benefits to advance toward a more sustainable energy future by integrating such strategies. This will have an impact on the country’s economic future and shape the country’s energy landscape for decades to come,” Chinedu added.
(Solace aseptic.com)
