Nigerian President Muhammadu Buhari on Monday opened Africa’s biggest oil refinery, with hopes it would help the energy-rich country achieve self-sufficiency and become a net exporter of refined petroleum products.
The $19 billion facility built by Aliko Dangote, Africa’s wealthiest man, in Nigeria’s economic hub of Lagos is one of the world’s biggest oil refineries and has a capacity of 650,000 barrels per day.
Some analysts have called it a “game-changer” for Nigeria’s oil and natural gas sector, which has been struggling for many years, while others say its capacity could be limited by oil theft. Most of Nigeria’s state-run refineries are poorly maintained and operating far below capacity. The West African nation must import refined petroleum products for its own use despite being Africa’s biggest oil producer.
The new oil refinery “will enable us to meet not only our country’s demand but also to become a key player in Africa’s and the global market,” Dangote said.
The refinery will start operations before the end of July, Dangote said, operating alongside a fertilizer plant and powered by a 435-megawatt power station. At full capacity, at least 40% of the oil products made there would be available for export, resulting in significant foreign exchange earnings for Nigeria, he added.
“Our first call is to ramp up production to ensure that this year we are able to fully satisfy our nation’s demand for higher-quality products to enable us to eliminate the tragedy of import dependency and stop once and for all the dumping in our market of toxic, substandard petrol products,” Dangote said.
In addition to creating tens of thousands of jobs, authorities believe the refinery could boost fuel supplies across Africa at a time when some of its refineries are operating far below capacity.
Addressing several heads of African nations at the opening ceremony, Muhammadu said the project showed the importance of partnering with the private sector “to accelerate economic growth across the continent.”
Some analysts believe the capacity of the refinery could be limited as Nigeria battles massive oil theft that has caused crude production to drop to a multidecade low in recent months, affecting government earnings and limiting capacity to execute important projects.
“The Dangote refinery is not a silver bullet for all the problems in the energy sector in Nigeria,” said Olufola Wusu, an oil and gas expert who was part of a team that helped review Nigeria’s gas policy.
However, he said it was a great start to reviving the sector.
“It will solve the problem of creating a domestic capacity for refined products and basically going to provide a new industry different from an import-dependent one,” he added.
It is not clear what agreement is in place with Nigeria’s major oil companies, but the refinery also will be looking to buy oil from outside the country if Nigeria’s limited crude production persists, Wusu added.
Monday’s move is “a defining moment for the energy sector in Nigeria, for the region and on the international sector,” said Mele Kyari, head of Nigeria’s national oil company.