President Muhammadu Buhari will inaugurate the Dangote Refinery on May 22, 2023. Imbued with a refining capacity of 650,000 barrels of crude oil per day, the Refinery is located at the Lekki Free Trade Zone, Lagos. Among many other economic imperatives, a successful day-to-day operation of the Dangote Refinery will ensure that Nigeria is self-sufficient in the local refining of crude oil, thereby saving scarce foreign exchange previously used in importing petroleum products into the country.
Through the installed capacity of local refining of crude oil products, Nigeria can save up to ₦1.02 billion daily, enabling it to redirect its financial resources to other urgent state-wide projects like education, agriculture, and infrastructure.
For keen observers and participants in Nigeria’s logistics industry, the Dangote Refinery is coming to life at a good time. On May 8, 2023, The Nigerian Association of Road Transport Owners (NARTO) declared that it was seeking funding from the Federal Government or the private sector to scale up its operation to match the prospective demand for the haulage of petroleum products from the Dangote Refinery.
This press briefing from NARTO is a significant marker of the role Dangote Refinery will play in Nigeria’s haulage industry, especially as it involves the transportation of petroleum products across the length and breadth of Nigeria. When in full operation, the Dangote Refinery will be Africa’s biggest oil refinery and the world’s largest single-train refining facility, surpassing Saudi Aramco Mobil Refinery’s refining capacity of 400,000 barrels of crude oil per day.
Therefore, to holistically assess the gains of the Dangote Refinery to Nigeria’s logistics industry, it is essential to explore the immense opportunities that a smooth operational workflow will offer the Nigerian haulage sector. The rest of this essay will deep-dive into the role that the Dangote Refinery can play in smoothening out Nigeria’s supply chain industry, especially concerning petroleum products and their derivatives.
Opportunities for Nigeria’s logistics industry through Dangote Refinery
1. Improving Nigeria’s capacity to take advantage of the AfCFTA
The African Continental Free Trade Agreement (AfCFTA) is the participating countries’ largest free trade agreement. Entered into force on May 30, 2019, the World Bank predicts that the AfCFTA could help raise African income to $450 billion by 2030.
The Bank also estimates that the AfCFTA could help reduce the number of people living in extreme poverty in Africa by 40 million within the foreseeable future. Through harmonized plans by varied African countries, the Brookings Institute believes that the combined consumer spending on the African continent could reach $6.7 trillion by 2030.
Given that the economic potentials of the AfCFTA are nuanced, comprehensive, and well aligned with African economic incentives, African enthusiasts, investors and entrepreneurs knows that the Dangote refinery couldn’t have come at a better time. As the AfCFTA progresses, Nigeria can be Africa’s main supplier of petroleum products, exporting to other African countries.
As of 2020, the import volume of petroleum products into Africa reached 1.77 million barrels per day. Comparatively, the daily oil demand in Africa reached four million barrels in 2020. With Nigeria leading the import of petroleum products in Africa, with an import volume of nearly 466 thousand barrels per day in 2020.
Tellingly, the Dangote refinery can play a significant role in the Nigerian economic drive of curbing imports by becoming self-reliant, to get to that level however, there’s need for more investors to come on board and build more refineries or buying the government-owned ones.
Since energy is a crucial source of economic growth, impetus from the Dangote refinery through the adequate source of refined petroleum products to the Nigerian economy can go a long way in helping Nigeria become Africa’s leading petroleum exporter. Through the successful installation of the Dangote Refinery, things like incessant fuel scarcity can become a thing of the past.
2. Reducing incessant fuel scarcity in Nigeria and renew investment in vessels and trucks
On January 21, 2023, the Major Oil Marketers Association of Nigeria (MOMAN) attributed Nigeria’s lingering fuel scarcity crises to the high cost of vessels and inadequate trucks to deliver petroleum products from depots to filling stations across Nigeria. The association further explained that there was biting fuel scarcity because of insufficient trucks in the country, since petroleum products could not be transported from depots to filling stations nationwide.
The positive cue from this situation is that the Dangote Refinery can help to remedy this prevailing challenge of the shortage of trucks. Following the imminent launch of Dangote Refinery, the Nigerian Association of Road Transport Owners (NARTO) has announced that it was seeking funding from the Federal Government or the private sector so that the association could scale up its operation to match the future demand for the haulage of petroleum products from the Dangote Refinery.
Doubtless, the potential economic benefits of the Dangote Refinery have made NARTO increase its efforts to seek funding to boost its trucks and petroleum transporting fleet. Looking at it, what I see are opportunities for investment in the logistics industry and ultimately for consumers who need the petroleum products at cheaper rate and on time.
The refinery have presented an economic incentive to invest more in vessels and trucks. Thus, I expect more significant investment in trucks and vessels needed for transporting petroleum products, across the country.
The inauguration and successful working operation of the Dangote Refinery portends many benefits for the Nigerian economy. In the fourth quarter of 2022 alone, Nigeria spent ₦1.79 trillion on the importation of Premium Motor Spirit (PMS), otherwise known as “petroleum” and Automotive Gas Oil (“Diesel”). The Dangote Refinery can significantly reduce Nigeria’s fuel importation needs from Europe, helping Nigeria save scarce foreign exchange and improve the downstream petroleum sector.
Added to the fiscal cost-cutting advantages that the Dangote Refinery offers the Nigerian economy are the potential benefits of helping Nigeria fully explore the AfCFTA and improving infrastructure investment in Nigeria’s haulage and transport sector. Indeed, the launch of operations at the Dangote Refinery proves it is time for local and foreign investors to bet on the Nigerian economy, as things can only get better, albeit with lots of work by all of us.