FROM its initial estimated cost of $9 billion, the total cost of constructing the Dangote refinery and petrochemical plant more than doubled to $18.5 billion, which arose from the Nigerian microeconomic environment vis-à-vis its relations with the global economy.
The president and chief executive officer of the Dangote Group, Aliko Dangote, had, in 2013, when he announced his intention to construct it, estimated the refinery to cost about $9 billion.
But, as disclosed by the Central Bank of Nigeria’s (CBN) governor, Godwin Emefiele, at the commissioning of the refinery on Monday, May 22, the cost had escalated astronomically by 2017 due to multiple factors.
The 650,000 barrels per day (bpd) refinery, the biggest single train refinery in the world, was commissioned by President Muhammadu Buhari and graced by other African presidents, including Nana Akufo-Addo of Ghana and Mohamed Bazoum of Niger Republic.
“Everything that was used for the construction of that refinery was imported; it is, therefore, not surprising that the hard currency needed overshot Dangote’s initial estimated cost of the project,” the executive vice chairman of Highcap Securities Limited, David Adonri, shared his thoughts on the facility with The ICIR.
Adonri expressed that many economic challenges had happened within the construction period, specifically the economic disruption of the Covid-19 and Russia-Ukraine war that caused global inflation.
With the hard currency foreign creditors had pumped into the project, the construction cost was expected to rise, Adonri said, adding that the domestic currency window, witnessed by the sharp depreciation of the naira to dollar over time, also primarily impacted on the project’s final cost.
As of September 2013, Nigeria’s exchange rate was N155.26 per dollar, compared to the about N461/$1 current exchange rate, a check by The ICIR has shown.
Comprising refinery, petrochemical, urea and fertiliser sections, and a subsea pipeline project, the refinery is expected to meet Nigeria’s oil demands and help with its available foreign exchange buffer.
“The commissioning of the Dangote Refinery is a significant milestone and game changer for Nigeria,” a policy analyst and former chairman of the Society of Petroleum Engineers (Nigeria Council), Joe Nwakwue, told The ICIR.
“It signals a change in strategic positioning for Nigeria, moving from a crude exporting country to an oil refining one once again.
“One hopes we sustain the momentum until Nigeria no longer exports crude oil but also exports refined oil and gas products. This will have a massive positive impact on our balance of payments, exchange rate, employment and revenue profile,” he added.
According to Nwakwue, the only challenge, however, would be to ensure the availability and reliability of the plant for efficient and cost-effective operations.
“I believe they are set up to ensure operational excellence,” he added.
Meanwhile, the Nigerian National Petroleum Company Limited (NNPCL) has said Nigeria needs a refining capacity of about 1.52 million barrels per day (mbps) to meet its petrol requirement by 2025.
With NNPCL’s nameplate capacity of 445,000 mbps and Dangote refinery’s 650,000 bps, Nigeria will still have a shortfall of 427,000 bps, equivalent to 20 million litres of petrol daily.
Nigeria, despite being Africa’s biggest crude oil producer, has faced recurring fuel shortages as the country’s dilapidated oil refineries are comatose to refine crude products that could serve to optimal capacity.
The country has relied for many years on importing petrol, diesel and other processed petroleum products.