Nigeria hopes to end subsidy as FG commissions Dangote refinery May 22

NIGERIA’s hope of ending subsidy payments on petroleum import will brighten on May 22 when President Muhammadu Buhari is scheduled to inaugurate the 650,000 barrels per day Dangote refinery in Lagos.

The Nigerian National Petroleum Company Limited (NNPCLtd), has been the sole importer of petrol, which economic watchers say has fuelled corruption in Nigeria’s oil sector.

An energy expert, Najim Animasaun, was optimistic the subsidy regime would end if the Dangote refinery performed optimally with almost 51 million litres daily production.

“Possibly, with this development subsidy will go,” Animasaun told The ICIR. 

The scheduled commissioning of the Dangote refinery was confirmed on Sunday, May 7 in a series of tweets from Bashir Ahmad, Special Assistant to the President on Digital Communications.

According to Ahmad, “Efforts by the Federal Government to make Nigeria self-sufficient in local refining of crude oil to save the scarce foreign exchange used in the importation of petroleum products have received a boost as the 650,000 barrels per day Dangote Refinery, the world’s largest single-train refinery, is set for inauguration on May 22nd, 2023, by President Muhammadu Buhari.”

On August 4, 2021, the (NNPCLtd.)acquired 20 per cent stake in Dangote’s oil refinery for $2.76 billion, as confirmed by the immediate past minister of state for Petroleum Resources, Timpre Sylva.

The ICIR reports that the integrated refinery project located in the Lekki free trade zone area of Lagos State will, indeed, be a big relief to both the Federal government, which is spending almost N6 trillion on fuel imports this year.

The refinery project cost an estimated $19 billion to build.

The integrated refinery and petrochemical project is expected to generate 9,500 direct and 25,000 indirect jobs.

Nigeria, Africa’s biggest crude oil exporter, imports virtually all its fuel needs due to moribund state refineries, which has prompted NNPCLtd’s interest in Dangote’s oil refinery.

A thread from NMDPA saying the refinery project is 97 per cent
A thread from NMDPA saying the refinery project is 97 per cent

In March 2021, the Nigerian government approved $1.5 billion of spending on the modernisation of its own Port Harcourt oil refinery and awarded a contract to Italy’s Tecnimont (MTCM.MI).

Sylva said 15 per cent of the contract sum had been paid, and work had started in Port Harcourt. He added that the cabinet also approved contract awards for the upgrade of the Warri and Kaduna refineries to Saipem SpA (SPMI.MI) and Saipem Contracting Ltd for $1.484 billion.

The pump price of petrol is not expected to drop significantly even if Nigeria starts refining crude oil locally as price would still be determined by the cost of crude oil.






     

     

    Oil industry watchers said the absence of shipping cost would, however, impact positively on price, though they are not expecting the cost of labour to be too different from international standards since local refineries will be paying their expatriate employees.

    Experts said an option for the Federal government to affect pump price at lower prices would be for it to sell crude to local refineries at a discounted rate for local consumption and production only.

    Until all that happens, Nigerians are again being sensitised on what to expect in the next few weeks on petrol pump prices.

    “There is likely to be subsidy removal as scheduled, and petrol prices will go up to N600 per litre,” a development economist, Kelvin Emmanuel, told The ICIR.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

    Join the ICIR WhatsApp channel for in-depth reports on the economy, politics and governance, and investigative reports.

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