One week before the end of his mandate, the outgoing President of Nigeria offered himself a ceremony with great fanfare on Monday, May 22, for the inauguration of the mega-refinery of the Dangote group, in the free zone of Lekki, on the outskirts. from Lagos, the economic capital of the country.

“This complex, which has the capacity to refine 650,000 barrels of oil per day, should allow our country to achieve self-sufficiency in terms of fuel and even have surpluses for export,” Muhammadu said. Buhari in front of an impressive audience of dignitaries – governors, kings, top brass, diplomats and oil industry representatives from across Africa. Several Heads of State from the sub-region also made the trip to personally congratulate the leader and billionaire Aliko Dangote, at the origin of this titanic project.

From the podium, the continent’s richest man promised to “reproduce what [the Dangote Group] has already achieved in the cement and fertilizer market, by transforming Nigeria from an importer to a net exporter. The commissioning of the world’s largest single-train (use of a single crude distillation unit) refinery is effectively meant to put an end to a cruel paradox: Nigeria may be the sixth-largest crude producer in the world, the country is forced to import almost all of its fuel since none of its four refineries is functional.

Insecurity and large-scale oil theft in the Niger Delta have further led to the erosion of oil production and the collapse of foreign exchange reserves. Nigerians therefore regularly experience serious shortages of gasoline, while the country struggles to supply itself with fuel.

A symbolic inauguration

At full capacity, the Lekki refinery should not only produce gasoline, but also diesel, kerosene and aviation fuel in sufficient quantity to cover Nigeria’s total refined product consumption, which is around 450,000 barrels per day according to specialists. Ultimately, Aliko Dangote therefore wishes to “export the surplus competitively to other markets, especially within the Economic Community of West African States, and more broadly throughout the continent”.

The plant’s proximity to the new deep-water port in the Lekki Free Zone should allow the refinery to be supplied with crude oil from the Niger Delta, but also to quickly load the refined product onto ships for shipment. abroad. A good part of the production could also be transported on board thousands of trucks to the four corners of Nigeria, according to the forecasts of the Dangote group – which does not seem to be worried about the dilapidated road network which surrounds the refinery, located on the borders from Lagos.

These spectacular declarations have indeed a hard time dispelling the doubts of local observers. Work on the refinery – the project for which was sketched out in 2015 – has been seriously delayed and its construction cost has skyrocketed to nearly 19 billion dollars, well beyond the initial forecasts set at 9 billion dollars. dollars. Finally, the inauguration which took place on Monday, May 22, is above all symbolic since the refinery will not begin operations immediately.

“No one expected it to start working on day one,” said Taiwo Oyedele, analyst at PWC in Lagos. It was above all a question of organizing this ceremony before Buhari left power, so that the project would be put to his credit. In his speech, Aliko Dangote assured that the production would hit the market “by the end of July-beginning of August”, without further details. For its part, the National Oil Company of Nigeria (NNPC) has pledged to immediately supply 300,000 barrels per day to the refinery, even if “it is unlikely that it will be able to process as many barrels at the moment,” according to Taiwo Oyedele.

“A gradual production trajectory”

While Dangote Group talks about full commissioning at the end of 2024, the teams of the International Monetary Fund (IMF) rather envisage “a gradual production trajectory: 100,000 barrels per day in 2024, 200,000 barrels per day in 2025, increasing to 300 000 barrels per day in 2026-2027”. Far from the 650,000 barrels mentioned at will throughout the inauguration ceremony.

The agreement between the NNPC and the Dangote group is also questionable. In 2021, the Nigerian government authorized the national oil company to acquire a 20% stake in the Lekki refinery for $2.76 billion. But the idea that a public company is impoverished to enhance a private company is not unanimous in Nigeria. “This is not a government project and I find it strange that the government of a country puts its energy future and investments in the hands of one man,” squeaks Dauda Garuba, an independent researcher based in Abuja.

And even though Dangote emphasizes the local market in its communication, “there is no known agreement at this stage that a percentage of production will be reserved for the Nigerian market”, underlines Ese Gladys Osawmonyi, an analyst at SBM Intelligence in Lagos. “The costs have tripled, there is a big pressure on the schedule and therefore a need to make a profit. This could go through exports,” she warns.

In its report published in February 2023, the IMF also noted that “the impact (…) will materialize mainly through savings on the cost of transport, because the fall in imports will be offset to a large extent by the reduction in exports. of crude, since the refinery would have to source it locally”. The Nigerian government will have to pay for Dangote’s refined oil in dollars anyway… “So if he sells everything there, it won’t really solve the problem of foreign trade and the supply of foreign exchange”, sighs a good knowledge of the Nigerian oil sector.

End of state subsidies?

Although critical, he nevertheless believes that the refinery could be an important vector of jobs when it begins operations – the Dangote group is already counting on the creation of 100,000 direct and indirect jobs. Its commissioning could above all allow the Nigerian government to lift once and for all its huge subsidies for gasoline imports.

These gave rise over the years to a large lobby of gasoline import traders, who worked to ruin the state-owned refineries, which produced more expensive gasoline than imported gasoline. So that the Dangote refinery does not meet the same fate on the local market, the Nigerian government will probably be forced to subsidize the purchase of its production. Unless he puts a definitive end to the subsidies.

The political influence of Aliko Dangote is such that he may well be the only one capable of putting an end to this system, which feeds corruption and dries up public coffers. “It is very, very difficult for the state to continue to pay 400 billion naira (about 800 million euros) in subsidy every month,” NNPC director Mele Kyari said on Monday.

“The removal of subsidies will obviously create a huge shock for the population. But if we allow refineries to be profitable, it could lead to the creation of a more coherent economic model, ”says the same source within the oil industry. Several local projects have emerged in the wake of the Lekki refinery and with the prospect of an upcoming lifting of subsidies. The French group Axens and the Nigerian group BUA notably signed an agreement for the construction of a refinery in the state of Akwa Ibom, while the Nigerian government signed agreements with the Korean Daewoo for the rehabilitation of its refineries in Warri and Kaduna.