Can this massive refinery solve Nigeria’s energy crisis?

by Eleni Giokos and Logan Whiteside

Nigeria has a problem: The country is one of the world’s top oil producers, but it doesn’t have enough gasoline to fuel its struggling economy.

Watch video documentary here.

nigeria economy divided beachWork is underway on the outskirts of Lagos.

On the outskirts of Lagos, Africa’s richest man is building what he says is a solution to the country’s fuel crisis: A massive, 650,000 barrel-per-day refinery that is designed to turn the country’s crude oil into gasoline for hungry consumers.

Aliko Dangote, a concrete magnate who is worth an estimated $15 billion, said the refinery and petrochemical plant has the potential to satisfy Nigeria’s daily requirement of 445,000 to 550,000 barrels of fuel, with spare capacity to export.

“This one we are building will satisfy 100% of the [fuel] need of Nigeria,” Dangote told CNNMoney.

There are reasons to believe Dangote will meet his goal of bringing the factory online by late 2018: He has already completed several major projects in Africa, including the world’s largest sugar refinery and cement factory.

If his refinery project is successful, Nigeria could even become an exporter of gasoline and other petroleum products to the region.

That would be a change welcomed by long-suffering Nigerians. The country’s four state-owned refineries are currently operating at just 5% capacity following decades of poor maintenance, mismanagement and corruption.

For average citizens, the lack of domestic refining capacity has meant frequent power cuts and eight-hour lines at gas stations.

“It is insane,” said Mansur Ahmed, a director of corporate communications at Dangote Group. “Nigeria produces between 2.2 million and 2.5 million barrels of crude per day, yet is not able to process more than about 100,000 barrels per day.”

Meanwhile, plunging crude prices have pushed Africa’s largest economy to the brink of recession. Energy accounts for about 35% of Nigeria’s gross domestic product, 75% of government revenue and 90% of export earnings.

The government is now racing through its foreign currency reserves, and a shortfall of $11 billion in its 2016 budget has forced officials to discuss a potential cash infusion with the World Bank.

Dangote, for one, is not losing any sleep over low oil prices.

“People who own refineries are the best out there, making money,” he said. “The lower the crude oil price, the more profit that you make in terms of refining margin.”

At the refinery’s planned oceanfront location, construction is underway. Pipes have been laid and a massive dredging operation has commenced, but the outline of a refinery has yet to emerge.

The company, however, is already putting competitors on notice.

“We certainly are putting a lot of people out of business, both local entrepreneur, local suppliers of product, and also major international importers to the country,” said Ahmed.

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Published by: Hear Alkebulan* Institute

Luqman Temitayo Onikosi is an Non EU International Post Graduate student at the University of Sussex who faces deportation to Nigeria and likely death from hepatitis if deported. Onikosi co founded the Hear Afrika Society in 2008 (Now Hear Alkebulan* ). Due to his chronic illness condition caused by Hepatitis B, Luqman set up the Hepatitis B Foundation - Brighton to raise awareness and to dispel the myths and stereotype about about Hepatitis virus and the illness. Onikosi also a co-founder of the Decolonizing Education: Towards Academic Freedom In Pluriversality (DETAFIP) think tank based at the university.

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